Documente Academic
Documente Profesional
Documente Cultură
ROBERT M. COLLINS
1
2000
3
Oxford New York
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For My Parents
Contents
Preface ix
Acknowledgments xiii
Conclusion 233
Notes 241
Index 285
Preface
Over the last half of the twentieth century, American political leaders,
policymakers, and intellectuals created a succession of growth regimes, all
of which emphasized growth both as an end in itself and, more important,
as a vehicle for achieving a striking variety of other, ideological goals as
well. In one regard, I follow the lead of many observers in seeing the pursuit
of growth as a time-honored way of avoiding hard questions and evading
tough decisions about the distribution of wealth and power in America. At
the same time, however, I depart from the view that Americans in the post-
war era “substituted economic performance for political ideology.”4 Rather,
I contend that growth did not suspend or supersede ideological conflict so
much as embody and express it. The political economy of growth became
an important arena for ideological expression and conflict in the postwar
era; throughout, ideology shaped conceptions of growth, while, at the
same time, growth itself influenced ideology. As a result of this interpene-
tration, economic growth over time emerged as a much more complex and
heavily freighted phenomenon than the rhetoric of many of its champions
and most of its detractors allowed. It is my intention to make that complex-
ity both more discernible and more comprehensible.
Of course, I do not mean to suggest that it was only in the postwar era
that growth came to be recognized or valued. Economists since Adam
Smith have long recognized the importance of growth for a rising standard
of living; Smith himself wrote in 1776 that “it is not the actual greatness of
national wealth, but its continued increase, which occasions a rise in the
wages of labor.”5 From the time of Alexander Hamilton’s Report on Manu-
factures in 1791 and its gradual implementation in the early nineteenth cen-
tury, the federal government used land and trade policies to encourage
national development. Similarly, fears about the end of growth or about
limits to growth, usually expressed as anxiety regarding the disappearance
of the frontier, became a staple of American discourse as early as the 1880s.6
What made the postwar pursuit of growth distinctively modern was the
availability of new state powers and means of macroeconomic management
dedicated to achieving growth that was more exuberant, more continuous
and constant, more aggregately quantifiable, and also more precisely mea-
sured than ever before. Perhaps we can best appreciate what made postwar
growthmanship distinctive by looking at the context from which it emerged,
for it was the ambivalence of New Deal economic policy that made the sub-
sequent emergence of growthmanship seem like a striking departure.
Acknowledgments
The Ambiguity
of New Deal Economics
I. Ambivalence
sium entitled “I’ll Take My Stand: The South and the Agrarian Tradition”
conjured up a malignant combination of growth, progress, industrialism,
and materialism—and then rejected the image with all the power of young
poets possessed. They were a small band of agrarian guerrillas, occasionally
addressing each other as “General,” engaged in a campaign against the
belief in bigger and better machines, against the faith that holds the acquisi-
tion of things to be a means of personal or social salvation. All had been
born in the South and most were, or had been, connected with Vanderbilt
University. The best-known among them—John Crow Ransom, Donald
Davidson, Allen Tate, and Robert Penn Warren—were already among the
South’s preeminent men of letters and their embrace of yet another Lost
Cause merely added poignancy to their appeal. Their campaign extended
through the Depression decade, and its echoes reverberated even as the
modernized South they so dreaded finally took shape in the aftermath of
World War II.1
It would be a mistake, however, to see the Agrarians’ protest as simply a
doomed lament against industrialization. It was that, of course, but they
denounced as well the endless, unbridled growth that was “the fundamen-
tal thesis underlying the industrial system.” They found the mindlessness of
what they called “moreness” particularly offensive. Such progress, they
observed, “never defines its ultimate objective, but turns its victims at once
into an infinite series. Our vast industrial machine . . . is like a Prussianized
state which is organized strictly for war and can never consent to peace.”
Their alternative was a South that “never conceded that the whole duty of
man was to increase material production, or that the index to the degree of
his culture was the volume of his material production.”2 They realized, all
too well, that their South was already slipping away.
For other Southerners, the future promised by economic growth and
development could not arrive quickly enough. Henry Grady and other
boosters of a “New South” had been courting industrial development for
over half a century, but the region stubbornly remained the nation’s poorest
and most backward. In 1935, Hugh Lawson White, a wealthy retired lumber-
man, won the governorship of Mississippi pledging to provide the “greatest
industrialization in this state that has ever been known.” White shepherded
the Mississippi Industrial Act through the state legislature and quickly put
into place a “Balance Agriculture with Industry” program, which autho-
rized the use of municipal bonds to construct factories for firms willing to
commit to local employment and payroll guarantees. The Mississippi pro-
gram yielded results only slowly and even then generated chiefly low-wage,
Prologue > 3
nonunion jobs in labor-intensive textile and apparel plants, but the idea
spread to neighboring states and later, after the war, gained favor across the
South as states resorted to an increasing variety of public subsidies in their
effort to buy industrial development.3
An even more ardent celebration of economic growth appeared in the
faraway Northeast. As the nation waited expectantly for the newly elected
Franklin D. Roosevelt to take the oath of office, a movement known as
Technocracy became, for a brief season, the object of cultlike attention.
Technocracy stole the national limelight from businessmen, politicians, and
gangsters alike. It was “all the rage,” exclaimed the Literary Digest in Decem-
ber 1932; everywhere it was “being talked about, explained, wondered at,
praised, damned.” The Nation, in a bit of wishful thinking, called it “the first
step toward a genuine revolutionary philosophy for America.” Less certain,
Will Rogers joked, “This technocracy thing, we don’t know if it is a disease
or a theory.” In reality, it was a little of both.4
Technocracy grew out of the ideas of Howard Scott, an eccentric, self-
taught engineer from Greenwich Village. Scott had known the iconoclastic
Thorstein Veblen, and served for a time as a consultant to the radical Inter-
national Workers of the World union. He believed that capitalism’s artificial
price system had created an imbalance between production and consump-
tion; consequently, technological progress and increasing production
brought only growing unemployment and debt. Technocracy’s answer was
to replace the old price system with a new one based on energy, on ergs and
joules rather than gold. The results would be revolutionary, “banishing
waste, unemployment, hunger, and insecurity of income forever . . . replac-
ing an economy of scarcity with an era of abundance.” But the price system
proved to be more durable than the movement that attacked it.5
Technocracy collapsed almost as quickly as it had appeared. After several
months, Americans had to admit to themselves, if not to others, that the
movement’s jargon was impenetrable. Scott’s credibility as a master engineer
collapsed with the revelation that his contribution to the Muscle Shoals
power project had been made as the foreman of a cement-pouring gang.
Soon Columbia University severed its ties with the movement’s proposed
Energy Survey of North America, and adversity and personal disputes caused
the movement to split in two. The parts lingered on, for the vision of perpet-
ual growth and permanent abundance was not without appeal, but the con-
tending factions operated increasingly on the fringe of American utopianism.
Although it is difficult to chart public opinion with precision in an era
when scientific polling was only in its infancy, it seems reasonable to specu-
4 > More
late that most Americans’ attitudes toward growth in the 1930s fell some-
where between the extremes of the Agrarians’ outright denunciation on the
one hand and the desperate courtship of the Mississippi Industrial Commis-
sion and the uncritical embrace of the Technocrats on the other. In that
hazy middle ground, attitudes were likely more complicated and equivocal,
and we can discern a hint of that ambivalence in the appeal of the era’s two
great demagogues, Huey P. Long and Father Charles E. Coughlin. As Alan
Brinkley has written, both the Louisiana politician and the radio priest cre-
ated dissident political movements by contesting, albeit indirectly, “modern-
ization itself—and the idea that human progress rested on continuing
economic growth and organization.” Yet because it was rhetorically and
politically difficult to attack something so powerful yet ineffable, at once
sacrosanct and problematic, Long and Coughlin took care to specify their
approval of material progress. The Kingfish promised a new order in which
“as much would be produced as possible so as to satisfy all demands of the
people.” “It is only an untrained and cowardly mind,” asserted Coughlin,
“which will disparage our high-powered tools, our better arrangement of
materials, our more efficient management.” Both men appealed strongly to
those who feared that the spread of industrial society had grievously weak-
ened community life and allowed the concentration of wealth and power in
distant places and sinister hands.6 Clearly, even in hard times attitudes were
colored by both the promise of what growth would do for a community and
the realization of what it could do to a community.
As the Great Depression’s hold on society and the economy tightened,
doubts about the desirability of growth were superseded by a new uncer-
tainty: whether economic growth—desirable or not—was likely or, indeed,
even possible in a highly developed capitalist economy. While we have
quantitative measures by which to gauge the swiftness and depth of the
nation’s economic collapse after 1929, it is more difficult to recapture the
collapse of New Era optimism and the rise of the new pessimism in eco-
nomic thought that accompanied the Great Depression. Herbert Hoover
had in his 1929 inaugural address proclaimed, “I have no fears for the future
of our country. It is bright with hope,” but his opponent in the 1932 presi-
dential campaign spoke of a rather different new era, an epoch defined by
economic maturity. “It seems to me probable,” Franklin D. Roosevelt
observed, “that our physical economic plant will not expand in the future at
the same rate at which it has expanded in the past. We may build more fac-
tories, but the fact remains that we have enough now to supply all of our
domestic needs, and more, if they are used.” The nation could already
Prologue > 5
make more shoes and more steel than it could use. In the future, he added
prophetically, Americans would of necessity think less about the producer
and more about the consumer.7
Roosevelt’s uncertainty about the future of the economy surfaced most
clearly in his campaign address at the Commonwealth Club in San Fran-
cisco in September 1932. He noted at the outset that the world in depression
seemed “old and tired and very much out of joint.” In contrast, he
observed, “America is new. It is in the process of change and development. It
has the great potentialities of youth.” But the proclamation of vigor imme-
diately gave way to a portrait of a mature, indeed sclerotic economy:
Our industrial plant is built; the problem just now is whether under existing condi-
tions it is not overbuilt. Our last frontier has long since been reached, and there is
practically no more free land. . . . We are not able to invite the immigration from
Europe to share our endless plenty. We are now providing a drab living for our own
people. . . . Clearly, all this calls for a re-appraisal of values. A mere builder of more
industrial plants, a creator of more railroad systems, an organizer of more corpora-
tions, is as likely to be a danger as a help. . . . Our task now is not discovery or
exploitation of natural resources, or necessarily producing more goods. It is the
soberer, less dramatic business of administering resources and plants already in hand
. . . of adapting existing economic organizations to the service of the people.8
ing.16 Much of that confusion derived from the fact that throughout the
1930s there existed beneath the main current of the New Deal’s scarcity eco-
nomics and state cartelism a subsidiary policy stream best characterized as
state capitalism or, more simply, public investment.17
Even as the major New Deal policies for industry and agriculture—the
NRA and AAA—sought to control production and curtail competition, a
variety of other New Deal measures aimed at economic development.
Spearheading this effort at the outset was the Reconstruction Finance Cor-
poration, which FDR inherited from the Hoover administration. The RFC
served at first as a safety net—a source of public capital—for the banks and
railroads that constituted a crucial part of the nation’s economic infrastruc-
ture. Later in the decade, the RFC sought to become, Jordan Schwarz has
written, “a catapult of growth for entrepreneurs.” Throughout its lifetime,
the agency financed a host of capital improvement projects that created the
infrastructure on which later economic growth would be based. Other New
Deal public investment focused on power development. The Tennessee Val-
ley Authority (TVA), created in 1933, quickly became the largest power pro-
ducer, private or public, in the United States, and especially after David E.
Lilienthal became TVA chairman in 1938, the agency took the lead in bring-
ing large manufacturing plants to the South. The New Deal’s Rural
Electrification Administration (REA) prepared the way for the economic
development of rural America. The REA’s Electric Home and Farm Admin-
istration financed the purchase of electric appliances in the hope of hasten-
ing the spread of electricity across the American countryside.18
A host of other building projects contributed the hydroelectric power,
roads, and bridges that would later help bring the underdeveloped West
into the national economy. Beginning with the construction of Boulder
Dam outside Las Vegas, the federal Bureau of Reclamation shifted its
emphasis from irrigation to multipurpose projects that helped create the
power infrastructure for western industrial development. The western con-
struction firms making up the fabled Six Companies consortium that built
Boulder, Grand Coulee, and Shasta Dams effectively launched their careers
with those New Deal construction contracts, and went on to become
prominent participants in the subsequent modernization of the West. In
both the South and the West, the spectacular economic growth and indus-
trial development of the World War II years were built on a foundation laid
by the New Deal.19
Skepticism and outright opposition to scarcity economics intensified over
the course of the Depression decade. In 1938, Phil La Follette, the governor
Prologue > 9
tion identified with the Civil War general Ulysses S. Grant: the “relentless
application of vast military power until the enemy surrendered uncondi-
tionally.” In practice, both roles, arms-maker and combatant, were defined
so as to maximize the nation’s material contribution and minimize the
expenditure of American lives. And behind both roles lay what Winston
Churchill once impatiently called the “American clear-cut, logical, large-
scale, mass production style of thought.”37
American factories made the arsenal of democracy concept a reality. In
the European theater, the United States supplied an estimated 35 percent of
all the munitions expended against Germany and her satellites by the Allied
powers. In the Pacific, an estimated 85 percent of all the munitions
expended against Japan came from American manufacturers. Overall, the
United States accounted for approximately one-half of the combat muni-
tions produced by the anti-Axis coalition.38
The same industrial strength facilitated the mobilization of the nation’s
own armed forces. At the beginning of the European hostilities in 1939, the
United States Army had fewer than 200,000 troops, 1,800 obsolescent air-
craft, and only 329 tanks. Many of its basic weapons dated back to World
War I, and even those were in short supply. By the end of the war, the
United States had mobilized about 12 percent of its continental population
(compared with Russia’s 13 percent, Britain’s 12 percent, Germany’s 14 per-
cent, and Japan’s 13 percent). In August 1945, the size of the army stood at 8.1
million, the navy at 4 million.39
The equipping of a huge, modern army, navy, and air force was one of
the fundamental economic accomplishments of the war effort. Over the
1940-45 period, American factories turned out 88,410 tanks, 46,706 self-pro-
pelled weapons, 2,382,311 military trucks, and 2,679,819 machine guns. In the
same years, the navy added to its already formidable fleet 10 battleships, 18
large and 9 small carriers, 110 escort carriers, 45 cruisers, 358 destroyers, 211
submarines, and over 82,000 landing craft of various types. American ship-
yards launched 5,777 tankers and cargo vessels to ply the all-important ocean
supply routes.40 The efficiency of the shipyards increased dramatically over
the course of the war, taking on the aspect of assembly line production: the
construction time for a Liberty-type cargo ship that had taken nearly 10
months to build during World War I was down to 105 days in 1942, a little
over 50 days a year later, and 40 days in 1944.41 Shipbuilder Henry J. Kaiser
enjoyed telling his fellow businessmen of the young daughter of a state gov-
ernor who stood on a platform in his company’s yard, champagne in hand,
ready to christen and launch a new ship. “But where is the ship?” she
14 > More
inquired. “Well, sister, don’t be uneasy about it,” shouted a nearby worker.
“You just start your swing; the ship will be there.”42
form, he directed, “The draft should make a clear declaration that the gov-
ernment accepts as a primary responsibility the maintenance of full
employment; and the prevention of depression and deflation on the one
side and of inflation on the other.”46 If such steps were taken, Hansen was,
he wrote to a colleague in 1945, “really very optimistic about our prospects.”
America was not “through”: “We can make adjustments to the changed sit-
uation [described in his theory of economic maturity] and go on to higher
living standards and as great, if not greater, opportunities for private enter-
prise as we have had in the past.” Such confidence, he reported, set him
apart from Keynes himself, who in 1944 and 1945 took a much dimmer view
of America’s prospects for full employment.47
The new goal of abundance and the optimism that underlay it appeared
in a number of different political guises. Liberals planned for a further
extension of the New Deal, based on economic growth instead of balance
and security. At the same press conference in 1943 at which Roosevelt related
the parable of Dr. New Deal and Dr. Win the War, the president spoke of a
“new program” built around “an expanded economy,” and in the 1944 elec-
tion campaign he sketched out the vision of a full-employment economy
offering sixty million jobs.48 Henry A. Wallace’s call for a postwar Century
of the Common Man amplified the themes of abundance and full employ-
ment.49 Walter Reuther, a leading expansionist throughout the war, pro-
claimed, “The road leads not backward but forward, to full production, full
employment and full distribution in a society which has achieved economic
democracy within the framework of political democracy.”50
Few businessmen favored a resurgent, hyperactive New Deal, but the
optimism that inspired liberal visions of a new political economy encour-
aged many executives as well. Paul Hoffman, head of the Studebaker Cor-
poration and chairman of the Committee for Economic Development,
recalled that the Depression had given birth to “some strange thinking on
the part of business, labor, agriculture, and government—thinking which in
turn found expression in weird policies.” These policies, he declared, had
been “designed to fasten upon us an economy of scarcity.” But the war had
changed all that, and had opened the way to a “peacetime economy of
abundance.”51 General Robert E. Wood of Sears, Roebuck, who in the late
1930s had quoted Hansen’s views on economic stagnation approvingly—”It
means,” he observed rhapsodically, “that the sun has passed its zenith and
the shadows of afternoon have begun to fall”—would backtrack soon after
the war and declare the idea of economic maturity to be “the greatest of
the many fallacies enunciated in the 1930s by the New Deal.”52
16 > More
The Emergence of
Economic Growthmanship
amount of scarcity in the midst of plenty.” But that was “a recipe for class
warfare,” Bowles believed, “and for a dog-eat-dog society in which no group
could prosper except at the expense of some other group.”3 Bowles foresaw
a different future. In 1946 he published Tomorrow Without Fear, a liberal tract
that had at its heart the question “Where is our productive capacity going to
be ten years hence, twenty years from now?” His answer was optimistic:
“Our population isn’t going to stop growing, technology isn’t going to
stand still, and all these new plants and machines, bought by an average of
30 billion dollars a year in business investment spending, will steadily
increase our ability to produce.”
Bowles predicted that “by the late 1960s our national production . . . will
have grown to the breathtaking total of 400 billions of dollars a year!”4 Sig-
nificantly, he shifted the discussion from economic expansion (that is, the
putting to work of idle resources, the elimination of economic slack, and
the achievement of full employment) to what economists regard as pure
economic growth—the long-term growth of economic potential, of poten-
tial output. Still, it remained for Truman’s new Council of Economic Advis-
ers to develop fully the concept of growth and give it a place of primacy
among the other goals—notably full employment and economic stabil-
ity—that guided postwar economic policy.
sian analysis and ready to accept many of the most basic Keynesian pre-
scriptions. Indeed, an early CEA memorandum to the president spoke of
the “wise policy of deficits under adverse business conditions.”5 But the
three also had strong institutionalist leanings and a keen interest in micro-
economic phenomena.6 As Keyserling subsequently observed:
The whole basis of economic analysis is to analyze where your resource maladjust-
ments are, where allocations are going wrong, where your income flows are going
wrong. And you correct it by applying the stimulus or the restraint at the right
points, which really gets back to what I said in 1948. . . . We don’t have the kind of
economy where you can just throw a blunderbuss at the whole thing. Here again,
economists are beginning to say that we need micro economic as well as macro eco-
nomic policies.7
Thus, it was out of what can only be described as a unique brand of eco-
nomic eclecticism that the Council forged the new emphasis on growth as
the nation’s foremost economic task.
A gradual but clearly perceptible quickening of interest in growth can be
traced in the unusually philosophical year-end reports submitted by the
CEA between 1946 and 1950. The first such report in December 1946 recog-
nized the legitimacy of stabilization as a fundamental policy aim: “The
passing of the Employment Act . . . would have been no more than a sense-
less gesture,” the president’s advisers commented, “if it did not express a
considered belief that . . . we could moderate in the future the devastating
periods of business depression.” But they also cautioned that mere stability
was not by itself a wholly satisfactory criterion of success. Indeed, the
“greatest danger of recent years” had been “a more or less permanent equi-
librium at a low or ‘stagnation’ level.”8 High employment per se did not
constitute a completely trustworthy measure of economic success either.
“Maximum employment,” the Council warned in 1947, “may be achieved in a
rich economy or in a poor economy, in a static economy or in a dynamic
and growing economy.” Indeed, experience had already demonstrated the
“inadequacy” of aiming merely at a high number of jobs. “We were aston-
ished,” the CEA declared, “to find, after the country had reached the ideal-
ized figure of 60 million [postwar] jobs, that the volume of production still
was disappointing.”9
At the end of 1947, the CEA suggested that the attention already given to
economic stability and full employment be complemented by an increased
emphasis on “maximum production,” the “belatedly added phrase” in the
20 > More
wages, benefits, inflation, and productivity paved the way for the banner pro-
duction years of the 1950s. It also constituted a self-conscious elevation of
growth at the micro level that meshed perfectly with the growthmanship tak-
ing shape at the macro level. It is little wonder that Truman promptly gloated
that the Treaty of Detroit was an answer to those “who have been making
fun of the idea that our economy has to grow continually.”26
The CEA’s direct impact on events increased further in 1950. The January
1950 Economic Report to the President declared, “Maximum production and
maximum employment are not static goals; they mean more jobs and more
business opportunities in each succeeding year. If we are to attain these objec-
tives, we must make full use of all the resources of the American economy.”27
Within months, the nation’s national security policymakers, working under
Keyserling’s tutelage, incorporated the doctrine of growthmanship into Cold
War strategy. In the wake of the “loss” of China and the Soviet development
of an atomic bomb, they undertook a sweeping reassessment of America’s
Cold War stance. Truman first read the resulting document, the famous NSC-
68, in April; after the worldview expressed in NSC-68 appeared to have been
validated by the outbreak of fighting in Korea in June, Truman finally
approved the document in September 1950.
NSC-68 suggested that economic growth could be used to generate the
funds required for a massive rearmament and a redefinition of the nation’s
global responsibilities. As the authors of the plan wrote, “The necessary
build-up could be accomplished without a decrease in the national standard
of living because the required resources could be obtained by siphoning off
a part of the annual increment in the gross national product.” Growth
would provide the vast resources necessary for what the diplomatic histo-
rian John Lewis Gaddis has characterized as a “symmetrical version of con-
tainment,” which would seek to give the United States a kind of perimeter
defense against communism. All points on the perimeter would be equally
important; in the words of NSC-68, “a defeat of free institutions anywhere
is a defeat everywhere.”28 Thus was made a connection between unlimited
means and unlimited ends that, as we shall see later, would bring another
generation of liberals to grief in the late 1960s.
The combination of NSC-68 and the outbreak of the Korean War
touched off a vigorous debate over economic mobilization policy later in
1950, and here, too, growthmanship played an important role. Keyserling
later recalled the events in a fashion rather typically unencumbered by
humility:
The Emergence of Economic Growthmanship > 25
The really great issue that arose at the beginning of the Korean War was the balance
between trying to finance the war out of diversion of resources, as against financing
the war out of economic expansion. I think the greatest single decision made . . . was
the decision to go for a program of very large economic expansion. This involved a
very hot battle within the administration, and one which was won completely by the
growth people for the first part of the Korean war. I think that my initiation and partic-
ipation in that was about as large as that of any one individual could be in influencing
policy.29
The relations between the CEA and the economics profession on mat-
ters of theory never fulfilled the early hopes and expectations of Nourse
and others. John D. Clark noted the difficulties in bringing theory to bear on
policy, using the example of business cycle theory. He observed that “there
is no professional consensus upon business cycle theory, only professional
agreement that each particular theory is inadequate.” Moreover, he con-
tended, “cycle theory has seemed to be almost irrelevant in the work the
Council must perform. . . . Upon no occasion have the members of the
Council raised any point of cycle theory and no agreement upon any point
under consideration . . . has ever been delayed while the Council members
exchanged their views about the business cycle.” The CEA’s analysis, Clark
added, “does not require resort to cycle theory but can be founded upon
simple economic principles which are far more limited.” And the situation
concerning cycle theory was true more generally as well: “The Council has
not found that its ability to reach a conclusion about the probable effect of
various economic conditions or about the correct government policy to
meet observed problems has often been seriously limited by the lack of a
satisfactory economic theory.”35
Keyserling found attempts to bring economic theory to bear on prob-
lems similarly unrewarding. In commenting on just such an effort by Don-
ald H. Wallace of Princeton, a study of “Price-Wage-Profits Relations”
undertaken at the CEA’s behest, Keyserling wrote: “It seems to me that rela-
tively little attention should be paid to [general theory], not because it is
unimportant, but because it is to be assumed that members of the Council
and staff are reasonably familiar with general economic theory and keep
abreast of it.” Keyserling’s preference for the empirical over the theoretical
was unmistakable: “In the final analysis, we are fairly well in agreement
here on general theory and need to get down to the brass tacks of some fac-
tual appraisals.” Whereas academic economists discussed prices and wages
and profits “in the refined atmosphere of theoretical techniques,” the CEA
and government policymakers of necessity operated “in a world where
prices and wages and profits are being made.”36 In the real world of policy,
Keyserling made it clear, theory played but a small role at best.
With just this perception in mind, Roy Blough, who joined the Council
in 1950 as its third member after Nourse’s resignation, wrote shortly there-
after that “economics in Washington is, in general, not at the high level of
intellectual intensity that is characteristic of the better universities.”37 For
the Truman CEA, theory did not inform policy in general or the emergence
of growthmanship in particular in any notable way, if theory is taken to
The Emergence of Economic Growthmanship > 27
tional corpus of economic theory, and ruled out by some economists as not
the proper concern of economics.” Symptomatic of such neglect, Paul
Samuelson offered virtually no discussion of productivity or economic
growth or development in the 1951 edition of his classic introductory eco-
nomics text, except in connection with Malthus and secular stagnation.41
A second reason for the underdevelopment of the relationship between
policy and theory was the striking lack of interest in theory per se on the
part of key CEA figures and, less surprising, on the part of the leader to
whom they reported, President Truman. Nourse noted caustically in Sep-
tember 1949:
Keyserling and Clark were quite impatient with my idea that, since we have to do a
great deal of re-thinking of economic theory and business practices, the staff work is
heavily weighted with refinement of issues and statements of pros and cons rather
than setting forth dogmatic answers. Keyserling said that he knew it was quite possi-
ble to get prompt and definitive answers to the problems. When he was in the Hous-
ing Administration he had in two and a half months prepared a report that was a
perfect example of the succinct laying out of a major economic problem with its
proper solution.
cipline into esoteric subspecialties and “in that process came to regard those
who wanted to take a general view of the economic problems of the nation
as a whole and their relationship to one another as being almost apostates
from the field of economics.”45 Such views made a disdain of theory into a
defense of self.
As the CEA’s “boss” and chief consumer of economic advice, Truman
manifested no interest in the theory or even the reasoning behind the CEA’s
recommendations. Nourse could be absolutely devastating in his private
assessment of the president’s approach to economic problems. After one
meeting with Truman, he wrote, “I left with the feeling that his decisions
were already pretty well taken, and this on the basis of information that
comes to him casually from a variety of sources, with the final determinant
his own political judgment. He seems to me quite quick and brittle in his
reactions, not at all attracted by a contemplative analysis of basic issues.”46
Even Keyserling, who held Truman in considerable esteem, admitted, “He
was not a technical economist, a formal economist. He had the level of
understanding that one might expect, shaped by certain profound views
that were fundamental to economics and public policy.”47
Indeed, Truman’s attitude regarding theory was less a lack of interest than
actual resistance and antagonism. As presidential assistant Joseph Feeny
expressed it (with the president’s warm approval) in early 1950, “History has
shown that the long-range theories of the past have sounded fine in theory
but have rarely ever proved beneficial when applied. . . . Our country has
reached the soundest and most stable era of prosperity by a realistic approach
to each particular problem as it arose.”48 Thus the scientific weakness in
growth theory was joined by a disinclination on the part of both adviser and
policymaker to use whatever theory might nonetheless be available.
The final factor responsible for the weak influence of theory on policy
was the condition and usefulness of the primary instrument available to
effect the interaction between policy and knowledge, the Council of Eco-
nomic Advisers itself. The CEA proved unequal to the task for a number of
reasons. First, the press of current events and workaday routine exerted a
stultifying influence on the intellectual work of the Council. Donald Wal-
lace complained to Nourse in mid-1947 of the CEA staff’s inability to find
the time to do or even to oversee basic research, and the problem proved
intractable.49 In 1949 Nourse wrote to Senator Paul Douglas that “the
resources of the Council and its small staff are fully taxed by the continuing
task of furnishing economic judgments upon concrete problems as they
arise. . . . Therefore we have rigorously restricted our discussion of general
30 > More
problems in an abstract setting to a very few that we have dealt with in the
Council’s annual reports to the President.”50 The next year, when Roy
Blough joined the Council, he told a friend: “I suppose there are ways to
make this job of mine a nice quiet study of economics, but I do not seem to
have learned them. There are a lot of very difficult problems that we get
drawn into; many conferences with the leading lights . . . newspapermen
who want to get ‘background’ or at least to satisfy their curiosity about
what I look like; speeches to write and deliver.” “I am enjoying the work,”
he wrote to another colleague, “but find there is a good deal of pressure.”51
Moreover, all such pressures of routine, daily crises, and recurrent bureau-
cratic deadlines were exacerbated by the “start-up” problems that inevitably
troubled a wholly new agency like the CEA.
Compounding the deadening influence of daily routine and the press of
short-run problem solving were the budget and staffing difficulties that
plagued the Council during the Truman years, some the result of political
pressure by conservatives and Republicans. The cuts were more than a
mere annoyance. According to Nourse, they “precluded our holding topical
conferences of academic, business, and labor economists that we had in
mind as a means of mobilizing professional thinking on national economic
problems.”52
Finally, the CEA’s ability to exploit economic theory was limited by the
disunity that characterized the Council during Nourse’s tenure. The confli-
cts that separated Nourse from Keyserling and, to a slightly lesser extent,
from Clark were real, encompassing professional (i.e., economic), political,
and philosophical disagreements and personality clashes. The most funda-
mental intellectual disagreement between Nourse and Keyserling involved
growth: Nourse believed in economic limits and the necessity of trade-offs
and hard choices; he was fond of observing that “the hard facts of economic
life” dictated that “you can’t eat your cake and have it too”; in his eyes, Key-
serling was dangerously oblivious to the threat of an inflationary overheat-
ing of the economy.53
The disagreement between Nourse and Keyserling over growth and lim-
its proved especially divisive because it spilled over into other important
debates. The running controversy over defense spending that occupied the
attention of policymakers throughout the immediate postwar decade
brought matters to a head. Nourse became a chief spokesman for those
“economizers”—including the conservatives Herbert Hoover and Senator
Robert Taft, the commentator Walter Lippmann, as well as Truman’s own
secretary of defense, Louis Johnson, and officials in the Bureau of the Bud-
The Emergence of Economic Growthmanship > 31
get—who argued that overspending for defense would weaken the U.S.
economy and run the risk of creating a garrison state that would destroy
American democracy in the effort to protect it. Keyserling, as we have seen,
spoke for the other side, joining Secretary Dean Acheson and other State
Department officials, the National Security Council, and the military in
advancing a national security ideology that held the U.S. economy capable
of doing whatever was deemed necessary for defense of the American way
of life and national interests.54
Keyserling believed in retrospect that the long-run cost of this discord on
the CEA affected both the emergence and then the staying power of the
growth orientation. He recalled:
I think that President Truman was completely sold on the general idea of economic
growth . . . but I cannot say that I was ever fortunate enough to have at any time, the
kind of understanding and support and breadth of support which I think existed, let
us say for the policies of the Kennedy economic advisers. . . . It was always a hard bat-
tle; it was a hard battle initially because the Council was divided on how it should
behave.55
In the end, work pressures, budget constraints, and disunity all compro-
mised the CEA’s ability to exploit economic theory to any noteworthy
degree in the reorientation of policy around the overriding goal of growth.
In summary, growth theory itself was impoverished, the will to use it
was feeble, and the instrument designed to foster the application of theory
to policy—the CEA—was handicapped in significant ways. In its last year of
operation, the Truman CEA continued to seek ways “to bring the thinking
of the economics profession to bear upon the work of the Council.”56 The
task had originally been undertaken with some optimism in 1946. That the
effort seemed to be virtually starting anew six years later testified to the fact
that the early hope for a marriage of economic science and national policy
remained unfulfilled.
If technical economic theory contributed little to the reorientation of
policy around the goal of growth, what about influence running the other
way, from policy to theory? Here judgment is more difficult and necessarily
more speculative. The decade after 1952 witnessed, in the words of W. W.
Rostow, “a most remarkable surge of thought centered on the process of
economic growth.” As Simon Kuznets observed, this surge of interest was
“clearly not an organic outgrowth of continuously and increasingly effective
work on the problem leading to a scientific discovery, the latter stirring
32 > More
interest and stimulating research on a new foundation,” but rather was the
result of current events.57 Among these events, the emergence of a “Third
World” of modernizing nation-states and the continuation of a Soviet-U.S.
competition for military, economic, and propaganda dominance in the Cold
War were undoubtedly central. It is possible, indeed probable, that the
prominence the Truman CEA accorded economic growth also contributed
to the renewal of interest in the field of growth theory, but that contribu-
tion cannot be measured precisely.
Speaking for myself alone, I feel that if I do not know the parts that go into the analy-
sis and also how they are put together, I am merely indulging in a kind of informal
chatter when I discuss the outlook. . . . Each of us owes it to the Council to use scien-
tific procedures in formulating our independent individual judgments as well as our
collective judgment, and that requires that we see everything that goes into the pot.62
Whereas the CEA stood alone as the first federal agency expected (by
some, if not by all) routinely to bring economic theory to bear on the for-
mulation of policy, in the realm of economic measurement it joined a long-
standing, multifaceted federal effort. The Departments of Agriculture,
Commerce, Labor, and the Interior, as well as the Federal Reserve Board
and the National Recovery Administration, were already engaged in data
collection when Roosevelt in 1933 established the Central Statistical Board to
coordinate the federal government’s statistical services.63 The Reorganiza-
tion Act of 1939 subsequently transferred this coordinating function to the
Bureau of the Budget.
World War II necessitated a dramatic expansion of the federal govern-
ment’s statistical capability: just to mention such alphabet agencies as WPB
(War Production Board) and OPA (Office of Price Administration) is to con-
jure up the vision of a statistical juggernaut.64 Soon postwar planning pro-
vided a further spur. In August 1944, Roosevelt set off a flurry of activity
when he asked the Bureau of the Budget to prepare a comprehensive pro-
34 > More
gram of statistics for the reconversion effort.65 But Stuart Rice warned his
superiors that it was “easier to ask for such a program than to develop it”
and in the end much of Roosevelt’s proposed “Basic Statistics Program”
failed to gain congressional funding.66
It would be a mistake, then, to paint too rosy a picture of the statistical
tools and instruments available to the CEA as it set to work. The failure to
fund Roosevelt’s Basic Statistics Program was soon compounded by a fur-
ther round of budget-cutting in 1947; seeing creeping socialism and intru-
sive bureaucracy everywhere, conservatives attacked federal statistics
programs of all kinds.67 By 1949, the Budget Bureau had simply stopped
developing and submitting program proposals “in view of the congres-
sional attitude toward statistics.”68 Despite such problems, however, the
CEA inherited a legacy (however troubled) and a statistical arsenal (what-
ever the gaps) that served as a foundation for some noteworthy achieve-
ments on the policy-knowledge front.
The CEA’s statistical activities did not usually include the actual gather-
ing of data—other government and private agencies performed that ser-
vice—but rather focused on the use of data collected by others. The CEA’s
contributions came in all three of the kinds of information found in the fed-
eral statistical system: indicators, frameworks, and basic research.69 Some
were absolutely fundamental to the task of policymaking, and so were
unrelated to the emergence of growthmanship per se; others, however,
were clearly linked to the CEA’s growth orientation. One example of the
former was the CEA’s compilation of basic economic statistics published
under the title Economic Indicators. The statistics had originally been pub-
lished, in an abbreviated form, by the Bureau of the Budget, but at Keyser-
ling’s strong urging the CEA took over the effort, expanded its scope and
distribution, and arranged for regular monthly publication under the aus-
pices of the Joint Committee on the Economic Report.70
The CEA’s development of statistical frameworks—systems for illumi-
nating fundamental interrelationships between parts of the economic sys-
tem—necessarily reflected the conceptual nature of its thinking over the
years and thus was clearly linked to the emergent growthmanship. The
foremost statistical system adopted by the CEA, first for analytical and then
increasingly for heuristic purposes, was the so-called Nation’s Economic
Budget. First used in the 1946 budget published in January 1945 and summa-
rized in FDR’s accompanying budget message, the Nation’s Economic Bud-
get was then incorporated into the full-employment proposals that led
ultimately to the creation of the CEA. The CEA made it the statistical cen-
The Emergence of Economic Growthmanship > 35
terpiece of the yearly Economic Report of the President. In the words of Ger-
hard Colm, the Nation’s Economic Budget
simply presents gross national income and gross national expenditures in the two
columns of a national ledger. The totals of both sides must, of course, be equal.
National income and national expenditures are allocated to consumers, business,
international transactions, and government. . . . This presentation not only affords a
check on the estimates but also shows the interrelation between transactions of con-
sumers, business, and government.71
This was meaningless; you can’t tell what the rate of growth has been; or what
really happened in current dollars. You have to have constant dollars with different
deflators. The Secretary of Commerce said this would cost too much and he didn’t
see why we should do it. I had to go to the President. The result was that the Secre-
tary . . . was ordered to do it in constant dollars as well as current dollars.
In this way, Keyserling has correctly observed, “the picture in constant dol-
lars and in current dollars with the proper deflators” became available to
“economists and everybody else.”76
In the third area of statistics, basic research, the CEA’s growthmanship
fostered a major effort to study underdeveloped regions of the country. The
regional development research program included studies of the Southeast
(1949), New England (1950–51), and the Southwest (1951). Keyserling
directed the local economists charged with the New England analysis to
study carefully “the possibility that further self-development in this region
may be encouraged and facilitated by some national action favorable both
to that area and to national economic growth.”77 Thus, in the fields of sta-
tistical frameworks and statistical basic research in particular, the CEA in its
pursuit of economic growth both borrowed from science and contributed
significantly as well.
In the final analysis, the contribution of economics as a social science to
the initial reorientation of policy around growth was distinctly uneven.
Economic theory provided surprisingly little inspiration or guidance. On
the empirical side, however, advances in statistics contributed significantly
to the development of growthmanship. Ultimately, the recasting of policy
around growth was a political imposition. Rather than science pushing pol-
icy, or policy pulling science, the emergence of growthmanship suggests
another image: policy and science often marched in tandem, moving far-
ther and faster together than either could have alone, and moving closer
together as time passed. But it was policy—an elemental assertion of politi-
cal will and imagination—that caused the first step to be taken, fundamen-
tally altering the national agenda.
The Emergence of Economic Growthmanship > 37
Keyserling’s triumphs of 1949-50 did not last, however. In 1951, both his
expansionist approach and his concomitant preference for indirect controls
suffered defeat. In January, the administration instituted a general price
freeze, and later in the year it decided to “stretch out” military procurement
programs into 1955 and 1956. Full mobilization of American productivity
gave way to minimum mobilization. The CEA also found itself excluded
from the Fed-Treasury Accord of March 1951 and generally supplanted by
the Office of Defense Mobilization as the leading source of advice concern-
ing economic mobilization.78
The return of the Republicans to presidential power in 1953 furthered
the decline of growthmanship within the federal government. For the
newly reconstituted Eisenhower Council of Economic Advisers, under the
leadership of both Arthur F. Burns (1953-56) and Raymond J. Saulnier (1956-
61), the tension between the goals of economic growth and stability
remained central, but with a decidedly different emphasis. A visceral fear of
inflation and a keen sensitivity to the political dangers of recession com-
bined to lay stress on the business cycle and on stability. The result, at least
in the minds of growth-oriented Democrats such as Walter Heller, “kept
policy thinking in too restrictive a mold in the late 1950s.”79
The temporary and partial eclipse of growthmanship in the 1950s should
not obscure the Truman CEA’s considerable achievement in introducing,
articulating, and incorporating the new orientation into policy. The
achievement owed much to Keyserling’s efforts. From the outset, he was
the leading force in developing the administration’s economic philosophy.
Keyserling exerted a powerful influence within the CEA, both while Edwin
Nourse headed the agency and thereafter when he himself served as chair-
man; his intelligence, energy, single-mindedness, combativeness, and politi-
cal skill made him a truly formidable advocate in Council deliberations.
More important, Keyserling had influence beyond the CEA—he had the
ear of the president of the United States. The CEA’s emphasis on growth
“stems very largely,” Truman wrote him, “from your personal convictions”;
and the growth orientation, the president maintained, “has set the right
framework for meeting many economic situations.” Truman’s own frugal
instincts—he loved poring over budgets and was happiest when they bal-
anced—kept him from fully embracing a growth framework as the solution
to all problems, but, as his most searching biographer has written, Truman
“consciously and enthusiastically accepted” Keyserling’s ideas on growth,
38 > More
ate postwar period, assuming the mature shape that would so thoroughly
color American life for the remainder of the twentieth century that most
Americans simply assumed that the consumer culture was America and vice
versa. As growthmanship came increasingly to be discussed in explicitly
Keynesian terms, with an emphasis on boosting aggregate demand (which
came to be translated as: consumption, more consumption), the conver-
gence between the postwar political economy and the voracious postwar
culture of consumption became ever more complete. Even more broadly,
the emphasis on growth at once expressed and reinforced the tremendous
outburst of national optimism sparked by the economic recovery and mili-
tary victory of World War II. Confidence in the future had long been a
noteworthy feature of American life, but one dimmed considerably by the
trauma of the Great Depression; now, in the aftermath of the war, Ameri-
can expectations became grand once again, and in this revival of optimism
growthmanship operated as both cause and effect.84
Finally, the emergence of growthmanship owed much to the fact that
the new orientation promised to be so useful: for the CEA, it provided the
ultimate yardstick for macroeconomic management and the way to wed
macro- and microeconomic objectives; for business, it bid fair to generate
sustained prosperity in an increasingly productive mass consumption econ-
omy; for workers, it promised a constantly rising standard of living along-
side a burgeoning private welfare system of pensions and benefits; for
liberal activists, it served as a rationale and a vehicle for reform; for Cold
Warriors, it made feasible a new, globalized, and militarized containment
policy; and for Democratic partisans, it promised political appeal and elec-
toral success. Few significant departures in public policy have seemed at
once so innovative and inevitable.
2
The Ascendancy of
Growth Liberalism
Where had the stagnationists gone wrong? The answer is that the engines
of economic progress that Hansen had identified in 1938 had not expired but
merely stalled. Population growth rebounded dramatically, as the vaunted
baby boom in the years 1946–64 gave America the largest absolute popula-
tion increase in its history.2 The frontier experience was
replicated in the explosive growth of the crabgrass fron-
tier of suburbia and in the emergence of the Sunbelt.
Innovation continued to exert a healthy influence as the
auto boom continued into the postwar years, with
nearly 8 million passenger cars produced in 1955 (the
prewar high had been 4.5 million in 1929).3 The chemical
The Ascendancy of Growth Liberalism > 41
The tension between the often competing goals of stability and growth
dominated policymaking throughout the Eisenhower presidency. The
administration consistently resolved the tension in favor of stability, to the
detriment of the vigorous growth that had been characteristic of the imme-
diate postwar years. Often it did so self-consciously. In his final presidential
Economic Report, in January 1961, Eisenhower summed up his economic phi-
losophy one last time. “Some temporary acceleration of growth might have
been achieved,” he admitted, if inflationary expectations “had been allowed
to persist and to become firmly rooted.” But such growth would have been
“unsustainable,” requiring “far-reaching and painful correction.” Precisely
because of the administration’s “action to maintain stability and balance
and to consolidate gains,” the nation could now look forward to “a period of
sound growth from a firm base.”24 Despite the administration’s promises of
future well-being, however, the issue of growth flared into public contro-
versy during Ike’s second term and moved to the center of national debate
during the 1960 presidential campaign.
One important reason for the volatility of the growth issue was the fact
that it became a staple of partisan politics. Although both parties accepted
the need for both stability and growth, the primacy of the one over the other
divided the essentially pro-growth Democrats from the basically inflation-
conscious Republicans. Leon Keyserling played an especially important role
in keeping economic growth high on the political agenda of liberal Democ-
rats. He left government service at the end of the Truman presidency but
remained highly active in public life. He created a personal think tank, the
Washington-based Conference on Economic Progress, and worked cease-
lessly to spread his one idée fixe.
Keyserling imbued the liberal Americans for Democratic Action with a
passion for economic growth that served as that organization’s grand design
for economic policy throughout the 1950s. In an ADA handbook entitled
Guide to Politics, 1954, Keyserling derided the “depression psychosis” still
afflicting a segment of the population; even some liberals, he observed,
“have so little confidence as to think that the American economy is going to
be capsized again by every little puff of wind.” He called upon good liberals
to see beyond “stability” to the need for constant economic expansion. Sus-
tained growth would yield a $500 billion to $600 billion economy by 1960,
with “at least a one-third increase in the average standard of living.”25 Key-
serling’s views suffused the ADA’s 1956 platform, which proclaimed that sus-
tained growth would make possible a reduction in poverty, an expansion in
The Ascendancy of Growth Liberalism > 45
capita output of meat, milk, and butter; then, we shall have shot a highly
powerful torpedo at the underpinnings of capitalism.”29 With the threat of
mutual nuclear destruction still overhanging the world, the Cold War took
on the additional dimension of economic competition. The development of
a Soviet nuclear capability and the launching of Sputnik constituted hard
proofs, in the eyes of Walter Lippmann, that “the prevailing picture of the
Soviet economy as primitive and grossly inefficient was false.”30
The economic contest between the superpowers focused especially on the
matter of growth. Again, Khrushchev made the point with frightening direct-
ness: “Growth of industrial and agricultural production is the battering ram
with which we shall smash the capitalist system, enhance the influence of the
ideas of Marxism-Leninism, strengthen the Socialist camp and contribute to
the victory of the cause of peace throughout the world.” To American listen-
ers, the threat was clear. The Soviet economy was growing faster than the
American, enabling the Soviets to support a powerful military machine and
making the Soviet system dangerously appealing to Third World countries
looking for models to emulate. With the launching of a new Soviet seven-
year plan in 1958, Khrushchev predicted that by 1970 at the latest the Soviet
Union would “catch up with and outstrip the United States in industrial out-
put . . . [and] advance to first place in the world in absolute volume of produc-
tion and in per capita production.”31 The rhetoric was clearly ominous, but
the statistical reality of the Soviet threat proved harder to establish.
A 1957 study undertaken by the Legislative Reference Service at the
behest of the Joint Economic Committee concluded that “firm conclusions
about rates comparisons are fraught with many perils.”32 The problems
encountered in comparing Soviet and U.S. growth rates included the
sketchy quality of Soviet statistics and the possibility of their falsification for
propaganda purposes. More fundamental and more vexing for analysts was
the difficulty inherent in comparing economies that differed greatly in orga-
nization, structure, and maturity.
Notwithstanding such problems of measurement and analysis, the Leg-
islative Reference Service told Congress that the Soviet Union was expanding
its industrial output at roughly twice the rate of the United States. Because of
the much larger size of the American economy, the absolute gap between the
two vastly favored the United States and was continuing to widen. But if the
Soviet growth rate continued to be higher than that of the United States, “in
time . . . the absolute gap would begin to narrow sharply.”33
Allen Dulles, head of the Central Intelligence Agency, painted a similar
picture when he testified before the Joint Economic Committee in late 1959.
The Ascendancy of Growth Liberalism > 47
their very magnitude, appeared in some ways to have outrun our goals.”
The overall Rockefeller panel of thirty notable Americans then published
the individual reports as they were concluded one by one between January
1958 and September 1960. The economic policy panel report appeared in
April 1958. Its message was unambiguous: “We must accelerate our rate of
growth.” The report viewed growth as the essential means to whatever
ends U.S. society would aspire to, and it specified that a 5 percent growth
rate was required to provide the public and private expenditures needed to
achieve the nation’s goals of freedom, abundance, and security.38
The discussion of national goals continued with the publication in Life
magazine in 1960 of a series of articles on the theme of “the national pur-
pose.” Time-Life publisher Henry R. Luce caught perfectly the paradoxical
amalgam of confidence and anxiety that pervaded the search for national
goals: “But what now shall Americans do with the greatness of their
nation?” he asked. “And is it great enough? And is it great in the right way?”
James Reston called attention to “all this concern in the nation among seri-
ous men about the higher rate of growth in the U.S.S.R.” But “it isn’t just
the Russians now,” Archibald MacLeish noted, “it’s ourselves. . . . We feel
that we’ve lost our way in the woods, that we don’t know where we are
going—if anywhere.” For Walter Lippmann, at least, the way was clear:
“To use increments of our growing wealth wisely and prudently for public
and immaterial ends: that is the goal, so I believe, toward which our
national purpose will now be directed.”39
Even President Eisenhower joined in the search for purpose, appointing a
President’s Commission on National Goals under the auspices of the Ameri-
can Assembly, a neo-corporatist public interest group that he had founded
while president of Columbia University in 1950. The commission received
advice from a panel of economists whose members ranged from the Keyne-
sian Paul Samuelson to the monetarist Milton Friedman. Its report, publicly
transmitted to the president in mid-November 1960, underscored the impor-
tance of growth while straddling most of the issues connected with it. The
economy needed to grow, the commission maintained, “at the maximum
rate consistent with primary dependence upon free enterprise and the avoid-
ance of marked inflation.” As to what that maximum rate should be, the
commission noted that there was no consensus among economists and that
good faith estimates ranged from 3.4 percent per year growth in GNP to up
to 5 percent.40 What the President’s Commission was unable to decide—just
what a national commitment to economic growth entailed—became in 1960
one of the crucial issues of the presidential campaign.
The Ascendancy of Growth Liberalism > 49
As Senator Paul Douglas observed, the matter of growth was “at the
heart of politics in 1960.”41 Electoral politics at the presidential level brought
the concerns of half a decade into clear focus. The sharpening of the public
debate was evident in a series of articles on growth that the New Republic ran
throughout the electoral season. William R. Allen, an economist at UCLA,
agreed that “other things the same, having more goods and services is better
than having less.” But he cautioned against “putting the goose through the
wringer in the attempt to squeeze out the golden eggs faster”—faster
growth required hard choices and entailed costs and trade-offs.42
Significant divisions appeared even between those more disposed to
force the pace of economic growth. James Tobin of Yale University saw the
matter in stark terms: “We must devote more of our current capacity to
uses that increase our future capacity, and correspondingly less to other
uses.” Tobin called for a shift of national output from private consumption
to public and private investment, and he argued that the key to engineering
such flows was increased taxation.43 In so doing, he echoed the call for
fewer tailfins and for more and better public facilities that had been popular-
ized earlier by John Kenneth Galbraith in The Affluent Society. Keyserling,
however, argued vigorously that such a growth policy would be regressive
and that expanded production for private consumption was indeed needed
in order to liquidate the large pockets of poverty still existing in American
society.44 The difference was significant: Keyserling asked the quantitative
questions, “How much growth, how fast?” Tobin and Galbraith added the
important qualitative question, “What kind of growth do we want?”
John F. Kennedy embraced the goal of faster growth from the outset of the
1960 campaign. He called the resumption of economic progress “the number
one domestic problem which the next President of the United States will have
to meet,” and fitted the growth issue into his overall campaign theme—the
promise to get the country moving again.45 On the hustings, he observed:
The United States looks tired. My campaign for the presidency is founded on the sin-
gle assumption that the American people are uneasy at the present drift in our
national course, that they are disturbed by the relative decline in our vitality and
prestige. . . . If I am wrong in this assumption . . . then I expect to lose this election.
But if I am right . . . then those who have held back the growth of the U.S. during the
last years will be rejected.46
party to a 5 percent annual growth rate. For the party as well as for the can-
didate, growth would provide the means to great ends. As the platform
explained, “Economic growth is the means whereby we improve the Amer-
ican standard of living and produce added tax resources for national secu-
rity and essential public services.”47
The Democratic onslaught left the Republican candidate in a difficult
position. Vice President Richard Nixon had for some time been troubled by
Eisenhower’s cautious economic policy, complaining privately about “the
standpat conservative economics that [Secretary of the Treasury Robert]
Anderson and his crowd are constantly parroting.”48 In the spring of 1960,
Arthur Burns, a former chairman of the Council of Economic Advisers,
prevailed upon Nixon to urge that the administration adopt a more expan-
sive fiscal policy to stimulate the economy, but the president would not
budge.49 During the campaign, Nixon found himself caught between the
need to defend Eisenhower’s record and the desire to identify with a more
vigorous growth position. He reminded viewers during the first televised
debate that the administration “has encouraged individual enterprise and it
has resulted in the greatest expansion of the private sector of the economy
that has ever been witnessed in an eight-year period.”50 Yet, in late July 1960,
just before the Republican convention, Nixon and Governor Nelson Rocke-
feller of New York struck the so-called Compact of Fifth Avenue, an agree-
ment which specified that “the rate of our economic growth must, as
promptly as possible, be accelerated by policies and programs stimulating
our free enterprise system—to allow us to meet the demands of national
defense and the growing social needs and a higher standard of living for our
growing population.”51
Nixon attempted to edge closer to Kennedy’s expansive position on
growth while distinguishing the Republican version of such progress. “I
would say that my goal,” he announced, “and I think the only proper goal,
for those who do not buy the theory of government manipulated growth,
the only proper goal is a maximum growth rate. It might, in some instances
be 3 percent, in some instances 4, in some instances 5.”52 Such efforts failed,
however, to dislodge the connection in the public mind between the goal of
accelerated growth and JFK’s most powerful appeal, his call for action and
his promise of greatness. Kennedy was the growth candidate; Nixon was
not. And Kennedy won, if but narrowly.
The primal energy in the air after Kennedy’s victory was palpable. Richard
Goodwin, a Kennedy speech writer, would later recall “the almost sensual
thrill of victory—not a culminating triumph, but the promise, almost limit-
The Ascendancy of Growth Liberalism > 51
Of course, winning elections and making promises are easier than govern-
ing a vast nation and delivering on commitments. Kennedy knew as much,
even in the heat of the campaign. When he first met Walter Heller, an econ-
omist at the University of Minnesota, on a campaign swing through Min-
neapolis in October 1960, his initial question was: “Do you really think we
can make good on that 5 percent growth promise in the Democratic plat-
form?”54 Introducing Heller as his choice for chairman of the Council of
Economic Advisers at a late December press conference, the president-elect
said carefully, “What Dr. Heller and I are in agreement with, I hope, is that
the economy of the United States must grow at a faster rate than it has been
growing during the last five years, and we hope to stimulate that growth.”55
Although the commitment to increased growth was unshakable, the
precise path to that goal was not quite settled. Kennedy’s handpicked eco-
nomic advisers, including Heller, James Tobin, and Paul Samuelson, had
doubts about Keyserling’s muscular brand of growthmanship. Tobin saw it
as “‘more spending, more spending, more spending’ by everybody” and
later recalled that “the group around Kennedy felt politically that a kind of
unmitigated Keyserling or old-style Democratic liberalism in regard to eco-
nomics and fiscal policy wasn’t going to pay off politically both during the
campaign and afterwards.”56 But in reality Keyserling’s conception of
growth as the overriding goal—if not his particular prescription of the best
means to that end—was now firmly embedded in the moderate liberalism
of the New Frontier. In just a few short years, Tobin would write that “in
recent years economic growth has come to occupy an exalted position in
the hierarchy of goals of government policy.”57
As president, Kennedy immediately addressed the need to pick up the eco-
nomic pace. “The American economy is in trouble,” he warned in his first
State of the Union Address, on January 30, 1961. “The most resourceful indus-
trialized country on earth ranks among the last in the rate of economic
growth. Since last spring our economic growth rate has actually receded.”58
Growth was important in its own right as an economic goal, and it was crucial
in another fundamental regard as well: growth was to provide the additional
revenues needed to fulfill the administration’s domestic social aspirations
52 > More
and to achieve its national security objectives. Walt W. Rostow, the MIT eco-
nomic historian who joined the new administration, told Kennedy that “all
our hopes and policies, domestic and foreign, hinged on reconciling higher
growth with price stability. . . . I then underlined that his domestic program
required more public revenues which only growth could provide.”59
In fact, the pursuit of growth quickly became one of the New Frontier’s
distinguishing features. Heller was joined on the Council of Economic Advis-
ers by James Tobin and Kermit Gordon—in Heller’s words, “adherents of the
Cambridge–New Haven growth school.”60 Tobin recalled, “Growth was a
good word, indeed the good word.” Soon after the inauguration, all the
offices and desks in the Commerce Department displayed signs asking “What
have you done for Growth today?”61 The president ordered Heller “not to
return from an international economic meeting in Paris until [he] had discov-
ered the secret of European growth”; in November 1961, the administration
committed the United States to a twenty-nation Organization for Economic
Cooperation and Development agreement to raise the combined GNP of the
group by 50 percent in the 1960s. The commitment to growth took on further
symbolic and bureaucratic dimensions in 1962 when Heller complained to the
president that “our noses are rubbed in the unemployment, price, and bal-
ance of payments problem and policies every day—we need some device to
keep our noses to the growth grindstone as well.” He suggested an inter-
agency committee as “the best way to launch the get-up-and-grow effort,”
and Kennedy responded by creating a Cabinet Committee on Growth, which
included the chairman of the CEA, the budget director, and the secretaries of
the treasury, commerce, and labor. The straightforwardness of the new
group’s name contrasted tellingly with Eisenhower’s earlier Cabinet Com-
mittee on Price Stability for Economic Growth.62
Policy soon followed. Less than two weeks after his inauguration,
Kennedy sent to Congress a special message on economic recovery and
growth. Cautioning that “we cannot expect to make good in a day or even a
year the accumulated deficiencies of several years,” he proposed that the
nation aim in 1961 to bring production up to existing capacity—economists
call this expansion—and in 1962 and 1963 to achieve genuine economic
growth, the enlargement of productive capacity.63 As Heller later character-
ized the policy reorientation, “Gone is the countercyclical syndrome of the
1950s. Policy now centers on gap closing and growth, on realizing and
enlarging the economy’s non-inflationary potential.”64
The new policy of what Heller called “Keynes-cum-growth” proceeded
along three major lines into the mid-1960s.65 First, to narrow the gap
The Ascendancy of Growth Liberalism > 53
space exploration “in terms of ends (were they desirable?) rather than
means (can we afford it?).” The NASA payroll grew tenfold under the
Apollo program. By 1965, the agency and its private contractors employed
411,000. NASA appropriations rocketed from less than $1 billion in fiscal year
1961 to $5.1 billion in fiscal year 1964. Bound only loosely by the budgetary
constraints that had so fettered Eisenhower, first Kennedy and then Johnson
made the space program, in McDougall’s words, “a model for a society
without limits, an ebullient and liberal technocracy.”74
A similar pattern unfolded in the area of national security affairs, but one
that ended far less satisfactorily for the United States. Again, the story begins
with the Eisenhower presidency. As John Lewis Gaddis has argued com-
pellingly, the Eisenhower administration had moved away from Truman’s
brand of “symmetrical” containment as embodied in NSC-68. The basic rea-
son for the change was Eisenhower’s belief that the means available for
national security purposes were limited; the national economy might be
bankrupted if driven too hard, or its free enterprise character fatally compro-
mised by a regimented Cold War mobilization. Republican defense policy
emphasized not the indivisibility of interests à la NSC-68 but rather the pit-
ting of U.S. strengths against adversary weaknesses, at times and in locations
of American choosing—what Gaddis labels “asymmetrical containment.”75
The trick, as Ike saw it, was “to figure out a preparedness program that will
give us a respectable position without bankrupting the nation.”76
The resulting policy was labeled the “New Look,” a defense posture that
relied on the threat of massive nuclear retaliation at the top end of the lad-
der of confrontation and on the use of covert action through the CIA at the
bottom rungs.77 The idea, observed Secretary of State John Foster Dulles,
was to achieve “a maximum deterrent at a bearable cost.” During Eisen-
hower’s first year in office, the National Security Council identified the
nation’s two chief national security problems as the Soviet menace and the
need to react to that challenge without “seriously weakening the U.S. econ-
omy or undermining our fundamental values and institutions.” The New
Look was a doctrine, James Tobin observed at the time, “made as much in
Treasury as in State.”78
That the New Look strategy wore a dollar sign attracted critics as well as
admirers. Writing at the time in Foreign Affairs, Harvard professor Henry A.
Kissinger identified three major influences on military strategy—military
doctrine, technology, and fiscal concerns—and concluded that fiscal and
technological considerations were outweighing military doctrine in the for-
mulation of U.S. policy.79 Even within the administration dissident voices
56 > More
could be heard. Vice President Nixon pushed behind the scenes for greater
defense spending, and in 1957 the administration’s in-house Gaither Com-
mittee (named for its chairman, businessman H. Rowan Gaither) faulted
the reliance on nuclear deterrence and criticized the state of the nation’s
conventional capacity.80 Army generals in particular chafed under the New
Look arrangements, feeling squeezed out between the competing demands
of the navy and, especially, the most-bang-for-the-buck air force. Maxwell
Taylor, the articulate former army chief of staff, decried the reliance on
massive retaliation and offered instead what he called the “Strategy of Flex-
ible Response.” Taylor’s alternative would give the United States “a capabil-
ity to react across the entire spectrum of possible challenge, for coping with
anything from general atomic war to infiltrations and aggressions such as
threaten Laos and Berlin in 1959.”81 Flexible response emphasized the mid-
dle rungs of the ladder of escalation, not just the extremes. But such an
alternative obviously came only at a price, and Eisenhower remained a
fiscally conservative master strategist until the end.
The Democrats saw in Ike’s fiscally driven, asymmetrical defense policy
an opportunity for political advantage. Flexible response fitted with the sym-
metrical version of containment the Truman administration had forged
around NSC-68 in the early 1950s. JFK and LBJ slammed home a partisan
message that U.S. national security interests were indivisible. As Lyndon
Johnson put it in 1964, “Surrender anywhere threatens defeat everywhere.”82
The Democratic platform in 1960 promised that a new Democratic adminis-
tration would “recast our military capacity in order to provide forces and
weapons of a diversity, balance, and mobility sufficient in quantity and qual-
ity to deter both limited and general aggressions.” The candidate put an even
finer point on the matter: “We must regain the ability to intervene effectively
and swiftly in any limited war anywhere in the world.”83
Once in office, Kennedy moved energetically to implement the policy of
flexible response. Over the next three years there ensued what Theodore
Sorensen called a “buildup of the most powerful military force in human
history—the largest and swiftest buildup in this country’s peacetime his-
tory, at a cost of some $17 billion in additional appropriations.”84 Under the
leadership of Robert S. McNamara, the Department of Defense prepared to
fight two and a half wars simultaneously—the extreme contingency of
major wars in both Europe and Asia, with a concurrent lesser conflict some-
where.85 The buildup proceeded on three levels. Strategic forces were bol-
stered with the expansion of the land-based nuclear missile force to a
thousand Minutemen and the strengthening of the Polaris program. By
The Ascendancy of Growth Liberalism > 57
mid-1964 the United States had boosted its deliverable megatonnage by 200
percent. In the area of conventional strength, the army increased its num-
ber of combat-ready divisions from eleven to sixteen by 1965; the marines
added a fourth division and a fourth air wing; and the air force increased its
airlift capacity from sixteen to thirty-eight squadrons. Finally, Kennedy
increased dramatically the military’s capacity for unconventional war,
increasing the size of the army special forces (the favored “green berets”) by
a factor of five and reorienting them for Third World antiguerrilla war-
fare.86 Kennedy’s Department of Defense reported implementation of all
levels of the flexible response posture “in accordance with the President’s
directive that military requirements should be considered without regard to
arbitrary budget ceilings.” Yet, because the economy was growing so fast,
the percentage of GNP allocated to national defense actually decreased
slightly, from 9.1 percent in fiscal year 1961 to 8.5 percent in fiscal year 1964.87
The revolution at the Pentagon and the growth revolution at the White
House were intertwined from the beginning.
These intertwined revolutions set the stage for tragedy in Southeast
Asia. As John Lewis Gaddis has argued, it is budgetary constraint that has
“most often forced the consideration of unpalatable options” in postwar
foreign policy: “When one knows one has only limited resources to work
with, then distinctions between what is vital and peripheral, between the
feasible and unfeasible, come more easily.”88 Both the perception and the
reality of limits had constrained U.S. policy toward Vietnam in the 1950s.
The United States had refused to intervene directly to rescue the besieged
French garrison during the climactic battle for Dien Bien Phu in 1954. Sev-
eral critics of Eisenhower’s New Look policy believed it to be partly respon-
sible for this inaction. Army general James Gavin contended that if we had
spent only a small portion of our total massive retaliation expenditures on
limited-war forces, “we could have settled Korea and Dien Bien Phu quickly
in our favor.” General Maxwell Taylor contended similarly in 1960 that
“unfortunately . . . [the necessary conventional] forces did not then exist in
sufficient strength or in the proper position to offer any hope of success [at
Dien Bien Phu].”89 In 1961 Kennedy made Taylor his personal military
adviser and some months later appointed him chairman of the Joint Chiefs
of Staff. The economic limits of which Taylor had complained would oper-
ate only weakly as the Kennedy and Johnson administrations moved toward
war in Vietnam.
Southeast Asia provided immediate proof to the incoming Kennedy
administration of the correctness of their complaints about Eisenhower’s
58 > More
both inspired the vision and promised to provide the means for its realiza-
tion. Joseph Califano, an LBJ aide, recalled that the president “considered a
robust, noninflationary economy so critical to his domestic program that
he spent more time on economic matters than on any other subject.”99
Growth influenced the Great Society in a third way through its impact
on the content of that Great Society centerpiece, the War on Poverty. The
War on Poverty was based on the promise and reality of economic growth,
as Walter Lippmann observed in March 1964: “A generation ago it would
have been taken for granted that a war on poverty meant taxing money
away from the haves and . . . turning it over to the have nots. . . . But in this
generation . . . a revolutionary idea has taken hold. The size of the pie can
be increased by invention, organization, capital investment, and fiscal pol-
icy, and then a whole society, not just one part of it, will grow richer.”100
But the influence of growth ideas went beyond the belief that the annual
increment in GNP could be used to combat poverty. Granted that growth
provided wherewithal, how should those expanded resources be used?
The Johnson administration’s attack on poverty was dictated by both poli-
tics and broader conceptions of political economy. As the CEA observed in its
1964 Annual Report, the affluent majority could conceivably simply transfer
money to the poor via taxes and income supplements, which would bring all
poor families up to an acceptable minimum income level—for less than one-
fifth the annual cost of the defense budget.101 But as Johnson saw it, any such
redistributive scheme would fail on three counts. First, it would run counter
to his own Puritan work ethic, which had little use for simple government
giveaways. Second, any such redistributive plan would invite precisely the
political controversy and division that LBJ’s positive sum politics sought to
avoid. Finally, simple redistributive proposals ran counter to the growth idea.
As Carl Brauer has observed, “To growth- and efficiency-oriented econo-
mists, increasing the productivity of the poor was intrinsically preferable to
paying them not to work.”102 Lester Thurow, an economist who served as a
CEA consultant in the early 1960s, has recalled, “The national desire to accel-
erate the rate of growth and stay ahead of the Russians meant that nearly all
of the early Great Society and war on poverty programs were manpower
training programs and not income-maintenance programs.”103
The goal of the War on Poverty was not simply to enrich the poor but
rather to change them so that they, too, could then contribute to the
national goal of increased growth. Joseph A. Kershaw, the assistant director
of the Office of Economic Opportunity, in February 1965 made the point
directly: “Most income transfers simply result in different ways of slicing
The Ascendancy of Growth Liberalism > 61
the income pie. . . . What we need in the longer run are ways to increase the
productivity of the poor, ways to make them valuable in jobs and ways of
getting them from where they are to where the jobs are. Measures that do
this increase the size of the pie, not just the way it is sliced.”104 Such invest-
ment in human resources would, Kershaw concluded, enable the poor to be
“generating themselves the resources which will help eliminate poverty, not
only this year but for all those years to come.”105 Only later, as the 1960s
tailed into another era, did the political mainstream begin to reconceive the
problem of poverty as a problem of inequality. Both Richard Nixon, with
his Family Assistance Plan, and George McGovern, with his Demogrants,
would discover the political difficulty of shifting welfare policy from the
channels carved by the confluence of growth economics and liberal politics
in the heady days of the New Frontier and Great Society.
Thus did economic growth help underwrite and define the central public
undertakings of the 1960s. The interpenetration of growth economics and
liberal politics produced a defining feature of public life in the 1960s—the
ascendancy of what might be labeled “growth liberalism.” Growth liberal-
ism linked together two of the most disparate presidents in American his-
tory, giving their combined leadership a distinctive identity. Joining other
forces for social change that emanated from outside the established political
system, growth liberalism imparted to the 1960s an optimism and energy
that loom large in both our social memory and our historical understanding
of the era. But such was not the whole of the 1960s. If growth liberalism was
at its most robust in America’s grand public enterprises in space, abroad, and
at home in the years 1960–68, it was accompanied almost from the outset by
a noteworthy ambivalence and uncertainty, by the need somehow to match
its quantitative achievements with attention both to the quality of life and to
the ravages that growth itself visited upon society and environment.
By the middle of the 1960s, as its policies were put into place at home and
abroad, growth liberalism’s complexity came more clearly into view.
Growth liberals stressed production and quantitative change. As James
Tobin put it in 1965, “The whole purpose of the economy is production of
goods or services for consumption now or in the future. I think the burden
of proof should always be on those who would produce less rather than
more, on those who would leave idle men or machines on land that could
62 > More
tuals and ideologues were more troubled by the tension than politicians, yet
politicians were not immune. Schlesinger has written of Kennedy that
“despite his support of economic growth and his concern over persisting
privation, the thrust of his preoccupation was less with the economic
machine and its quantitative results than with the quality of life in a society
which, in the main, had achieved abundance.”113
The vision of a Great Society illuminated the tension vividly. Richard
Goodwin, the speech writer who coined the phrase, contended in 1965 that
“the Great Society looks beyond the prospects of abundance to the prob-
lems of abundance. . . . Thus the Great Society is concerned not with how
much, but how good—not with the quantity of our goods but the quality
of our lives.”114 Not surprisingly, LBJ’s speeches articulated the same objec-
tives. In first announcing the Great Society at the University of Michigan in
May 1964, Johnson proclaimed, “For half a century we called upon
unbounded invention and untiring industry to create an order of plenty for
all of our people. The challenge of the next half century is whether we have
the wisdom to use that wealth to enrich and elevate our national life, and to
advance the quality of our American civilization.” Americans had the
opportunity to choose between “a society where progress is the servant of
our needs, or a society where old values and new visions are buried under
unbridled growth.”115
The tension between quantity and quality affected more than political
rhetoric. By the early 1960s, administrators in the Department of Health,
Education, and Welfare (HEW) searched for a system of social bookkeeping
that would measure quality the way that the federal government already
tracked quantitative economic change. At the beginning of the Kennedy
administration, the Department of Health, Education, and Welfare had
begun publishing two series—the annual Trends and the monthly
Indicators—that compiled social statistics. In March 1966, LBJ pushed farther
and requested HEW “to develop the necessary social statistics and indicators
to supplement those prepared by the Bureau of Labor Statistics and the
Council of Economic Advisers.”116 As a result of this charge, the secretary of
HEW forwarded a report on social indicators entitled Toward a Social Report
to Johnson just before he left the White House.117 Social reporting would
remain in its infancy long after the 1960s had passed, but its forward move-
ment was noteworthy, both in its own right and as testimony to a current of
ambivalence that constituted the underside of growth liberalism.
Additional evidence of the complexity of attitudes regarding growth
appeared in the mid-1960s, with an increasing number of people both inside
The Ascendancy of Growth Liberalism > 65
of over $12 billion. His landmark legislation included the Clean Air Act in
1963, the Water Quality Act in 1965, the Endangered Species Act in 1966, and
the Air Quality Act and National Emissions Standards Act in 1967. Mean-
while, Lady Bird Johnson operated as a formidable political force in her own
right on behalf of beautification. Udall captured the impact of these devel-
opments when he wrote to Johnson in 1968: “No longer is peripheral
action—the ‘saving’ of a forest, a park, a refuge for wildlife—isolated from
the mainstream. The total environment is now the concern. . . . The quality
of life is now the perspective and purpose of the new conservation.”122
The concern with quality represented growth liberalism at its richest
and most complex. The desire to use economic growth to transcend eco-
nomic growth was as noble as it was chimerical, and the attention to
growth’s environmental consequences was as responsible as it was ironic.
Still the driving optimism remained: Growth would make the chimerical
and the ironic possible. On the horizon, however, lay a confrontation with
national mortality, with limits, with Vietnam. Not even the supreme politi-
cian Lyndon Johnson could avoid this confrontation and not even growth
liberalism could finesse it.
The great undertakings abroad and at home accelerated at mid-decade.
In 1965, as LBJ subsequently observed, “two great streams in our national
life converged—the dream of a Great Society at home and the inescapable
demands of our obligations halfway around the world.”123 On the home
front, more than one thousand projects had been initiated since the start of
the War on Poverty and in February 1965 Johnson called upon Congress to
double the national effort and to appropriate $1.5 billion for antipoverty pro-
grams in the next fiscal year.124 Over the course of 1965, Johnson signed into
law Medicare, a federal aid to education act, and the Housing and Urban
Development Act of 1965. Total federal social welfare expenditures (mea-
sured in real dollars to correct for inflation) increased a stunning 18 percent
in fiscal year 1965.125
Halfway around the world, America’s grand design in Asia in 1965
became the Vietnam War. The United States began a sustained air offensive
against North Vietnam in March, and a week later the first regular U.S. com-
bat troops arrived in South Vietnam. Initially limited to defensive opera-
tions, the U.S. forces were soon allowed to go on the offensive, and in late
June they executed their first “search and destroy” mission in War Zone D
northwest of Saigon. In late July the die was cast when Johnson—aware
that the United States was, in his words, “going off the diving board” into “a
The Ascendancy of Growth Liberalism > 67
Henry Fowler of the need to airlift $500 million in gold bars from Fort Knox
to New York “on a crash basis,” without insuring the shipments or arrang-
ing for the customary “second” weighing of the gold as it left the Kentucky
depository. A single-day record at the London gold market saw over 200
tons of the precious metal change hands. Fistfights broke out when ten
times the usual number of buyers jammed the gold pit in the cellar of the
Paris Bourse. Edward Fried, a key National Security Council (NSC) adviser
on international monetary affairs, recalled that “pandemonium had virtu-
ally broken out. Just had gotten completely mad. You could see pictures of
even Canadians, farmers, lining up to get gold.” It seemed, he remem-
bered, “as though this part of the world had gone completely off its
rocker.”2
As the crisis peaked in mid-March, the stakes appeared large to both
onlookers and participants. “The world is lost,” warned a British economist,
“we’re in the first act of a world depression.” Peking’s New China News
Agency observed with considerable satisfaction that “the capitalist mone-
tary system has in fact collapsed.” The Polish trade union council showed
only a little more caution in observing, “The dollar is doomed. It is possible
that joint efforts by world financial circles will stave off the crisis temporar-
ily, but this will only postpone the execution.”3
Among policymakers in Washington, the mood was appropriately tense.
“Everybody was just petrified,” recalled Under Secretary of the Treasury
Joseph W. Barr. “It was a hair-raising period in which we literally had to watch
the gold markets day by day and hour by hour.” At the NSC, Fried feared
“that this was not something that was any longer under control.” President
Lyndon Johnson’s national security adviser, Walt W. Rostow, briefed the pres-
ident on the stakes “at a most important moment in postwar history”: a mis-
step, he wrote, “could set in motion a financial and trade crisis which would
undo much that we have achieved in these fields in the past twenty years and
endanger the prosperity and security of the Western world.”4
The economic crisis of 1968 was dramatic but not entirely a surprise. What
made the crisis so daunting, and so difficult to resolve, was not its sudden-
ness but rather the way it tied together a number of serious problems that
fed off one another in a perverse synergy. The most deeply rooted such
problem concerned the United States’ chronic balance-of-payments deficit.
70 > More
the American capital market was restricted. The administration also placed
new, lower limits on the amount of goods American tourists could bring
home duty-free. No one of the initiatives was earth-shattering, but in com-
bination they brought about some improvement.10
Lyndon Johnson continued JFK’s initiatives. He brought to the balance-
of-payments issue no more intellectual sophistication than his predecessor.
Gardner Ackley, the chair of Johnson’s Council of Economic Advisers
(CEA), observed, “His understanding of the balance-of-payments problems
was pretty rudimentary,” adding tartly, “indeed, almost every politician’s
understanding of that was and is rudimentary.”11 Johnson introduced vol-
untary programs to limit direct investment overseas and to further reduce
bank lending, and he continued to try to cut military expenditures abroad.
“These things worked reasonably well” in the judgment of LBJ’s undersec-
retary of the treasury for monetary affairs, Frederick Deming, “but [then]
Viet Nam came along.”12 Deming was right on both counts: by 1965 the bal-
ance-of-payments deficit measured on a liquidity basis had been reduced to
$1.3 billion from its 1960 high of $3.9 billion; but the onset in 1965 of full-
bore fighting in Vietnam quickly negated such progress. The cost of main-
taining U.S. forces in Southeast Asia added substantially to foreign
payments, and the inflation unleashed by the war fueled a dramatic increase
in imports. By 1967 the balance-of-payments deficit was again running at the
level of 1960, nearly $4 billion.13
The Vietnam War, then, constituted the second source of the economic
crisis of 1968. It aggravated the balance-of-payments problem and sparked
off a round of inflation that twisted the economy out of shape, with conse-
quences that would still be felt decades later. “There’s no dimension of the
American economy in the last three-and-a-half years,” asserted LBJ’s last
chairman of the CEA in 1969, “which hasn’t been touched by Viet Nam, Viet
Nam changed the entire budget posture. It took all the elbow room away.”14
Put simply, federal spending for the Vietnam War and the Great Society
domestic agenda overheated the U.S. economy, which was already enjoying
an expansion spurred by the impact of the 1964 tax cut. In the fourth quar-
ter of 1965, the GNP rose by the largest amount in U.S. history. The rate of
inflation (as measured in consumer prices) that had averaged 1.3 percent per
year for the 1961-65 period increased to 2.9 percent in 1966, fell back to 2.3
percent for the first half of 1967, and then shot to 3.8 percent for the second
half of 1967 and 4.4 percent for the first four months of 1968.15
By the end of 1965 the danger of a serious inflation had become clear, if
not entirely unmistakable. In December the Federal Reserve Board reacted
Growth Liberalism Comes a Cropper, 1968 > 73
by hiking the discount rate—the rate that banks pay on loans from the sys-
tem—in order to apply some braking pressure to the economy. Later that
month, Gardner Ackley, chair of the CEA, wrote to Johnson, “The only con-
clusion I can reach is that an increase of individual and corporate income tax
rates should be planned, whatever the FY 1967 budget may be (within the
limits we have heard discussed). . . . From an economic standpoint, it needs
to be done as soon as possible.”16 The timing of Ackley’s assessment, one of
the first intimations that the Keynesian growth liberalism of the 1960s was
stretching the U.S. economy dangerously thin, was unintentionally ironic,
for on December 31 Time magazine put John Maynard Keynes on its cover,
only the second person no longer living to be so honored (Sigmund Freud
was the first). Achieving that extraordinary mark of popular acclaim, the
Keynesian creed had already begun its long retreat into disrepute.
At first, Johnson resisted calling for a major tax increase. He sought
instead to pursue a policy of guns and butter funded by the growth that the
new economics had already unleashed. In January 1966, the president
insisted, “We are a rich nation and can afford to make progress at home
while meeting obligations abroad. . . . For this reason, I have not halted
progress in the new and vital Great Society programs in order to finance the
costs of our efforts in Southeast Asia.”17 Throughout 1966 he stuck to his
guns—and butter—and refused to push for a major tax hike. In September,
he relented sufficiently to announce a spending cut of $1.5 billion in fiscal
year 1967 and the suspension of the existing 7 percent investment tax credit.
In his January 1967 budget message, Johnson finally proposed a temporary 6
percent surcharge on corporate and individual income taxes. Not until
August 1967—more than a year and a half after Ackley had advised LBJ of
the compelling need for a tax increase— did the administration present a
concrete plan for a temporary 10 percent surcharge on both corporate and
individual income taxes to deal with what Johnson now called “the hard and
inescapable facts.”18
Just why the administration dawdled has been a matter of considerable
speculation and debate. The fact that LBJ’s advisers were themselves
divided clouded the issue. Even Paul Samuelson, whom Ackley called “the
dean of our kind of economists,” came to believe for a time in 1966 that the
Federal Reserve’s tight money policy had introduced the possibility of a
recession and that consequently the need for a tax hike had passed.19 Trea-
sury Secretary Henry Fowler opposed the increase in late 1965 and early
1966.20 And Secretary of Defense Robert S. McNamara was, in Ackley’s
judgment, “strongly against it, not on economic grounds at all but on polit-
74 > More
police every corner of the world, fight limited wars, attempt to raise the liv-
ing standards of the peoples of the underdeveloped areas of the world, sat-
isfy our needs of our people at home and go to the moon all at the same
time without the creation of unstable deficits.”33 Consequently, Mills
fought Johnson not only to cut current expenditures but also to influence
the future by cutting both the old and new obligational authority that con-
stituted the pipeline for future spending.34
Mills brought to his side a majority of the Ways and Means Committee,
which in October 1967 voted 20 to 5 to temporarily table Johnson’s 10 per-
cent surcharge proposal. LBJ’s budget director, Charles L. Schultze, had
confidently predicted to the president that Mills and his committee were
playing “chicken” in an “eyeball-to-eyeball” confrontation with the adminis-
tration, and that Mills would blink first.35 But the chairman’s gaze proved
pitiless as the sun, and the Vietnam inflation worsened dramatically in the
last quarter of 1967. By exacerbating the chronic balance-of-payments prob-
lem and fueling a dangerous inflation, the Vietnam War worked a double
whammy on the U.S. economy. In doing so, the war also weakened the U.S.
dollar, and that weakness emerged dramatically in the last months of 1967
to challenge policymakers on yet another front.
The assault on the dollar was the third and most immediate of the
sources that in their interaction caused the economic crisis of 1968.36 Ironi-
cally, the assault was ignited by the travails of another currency, the British
pound. The pound had been weak and vulnerable to raids by speculators
through much of the 1960s. In Frederick Deming’s words, “You’ve got a
major confidence crisis in sterling about every fall on the fall, so to speak,
and there was in ’64, ’65, ’66, and then it culminated in ’67.”37 When the
pressure against sterling crested in mid-November 1967, Deming, the trea-
sury under secretary for monetary affairs, was already in Paris for regularly
scheduled meetings with senior treasury and central bank officials of the
major industrial powers (the so-called Group of Ten), and he led an effort to
mobilize multilateral support for the pound.38 But the attempt failed, and
on November 17 the British ambassador informed Johnson that the British
would on the following day announce a 14.3 percent devaluation.
The British devaluation touched off a frenzy in the gold market. Trea-
sury Secretary Henry Fowler had earlier warned Johnson that one result of
devaluation would be “that the gold market would come under very great
pressure—and might explode.”39 Demand for gold was already strong
because of the uncertainty generated by the summer’s Six-Day War in the
Growth Liberalism Comes a Cropper, 1968 > 77
Middle East, because industrial use was rising faster than new production,
and because the Soviets had refused in both 1966 and 1967 to sell gold on the
world market.40 The chronic weakness of the pound caused further move-
ment away from paper money into gold, and Britain’s devaluation provided
the final spark that caused the gold market to explode just as Fowler had
feared. The so-called gold pool—formed in 1961 by the United States and
eight other countries to sell gold when the demand was too great or to buy
gold when the supply was too great in order to keep its price in the London
gold market close to the official $35 per ounce—intervened to stabilize the
gold market and from November 20 through 27 incurred losses of $641 mil-
lion (of which the U.S. share was 59 percent).41
The devaluation of sterling and the financial unrest that followed sent
tremors of fear through the U.S. economic establishment. Alfred Hayes,
president of the Federal Reserve Board of New York, worried that the gold
pool was at the point of disintegrating.42 Fed chairman William McChes-
ney Martin Jr. observed, “It is the first time in all my 16 years with the Fed
that I have seen all the important bankers and directors agree that we face a
crisis ahead.” “The real question,” Fowler told the cabinet, “is can we keep
confidence in the dollar. The answer affects all the world.”43
The United States responded to the British devaluation and its aftermath
with a three-pronged defense of the dollar. First, the president made clear
the American commitment to keep the price of gold at $35 an ounce. Sec-
ond, the administration worked to get other nations to agree to maintain
their existing exchange rates in order to prevent a chain reaction of compet-
itive currency realignments. Third, Secretary Fowler called upon the bipar-
tisan leadership to build confidence in the dollar: “No single act could more
effectively restore and maintain confidence in the dollar, and shore up our
balance of payments position—both short and long term—than the pas-
sage of an expenditure reduction and tax increase package at this Session of
Congress.” “Markets don’t wait,” he added pointedly.44
Fowler’s remarks underscore how intertwined the problems of the balance
of payments, the Vietnam War, and the strength of the dollar had become by
the end of 1967. The war and the administration’s apparent inability to get the
tax hike needed to dampen domestic demand heightened international con-
cern about the U.S. balance of payments, and that concern in turn weakened
the dollar by encouraging heavy sales of that currency and purchases of gold
in the international market. It was this terrible interlocking combination of
problems that became the stuff of the economic crisis of 1968.
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tourist dollars, Johnson suggested that Americans defer for two years
nonessential travel outside the western hemisphere and promised new pro-
posals to increase the influx of foreign tourists to the United States. Finally,
to strengthen the basic trade balance, the New Year’s program promised
increased spending to promote U.S. exports and intensive efforts to further
reduce nontariff barriers to U.S. goods abroad.48
The initial public response to the new balance-of-payments program
was strongly positive, and a week after its announcement Ackley reported
“widespread optimism that speculation in gold should be substantially
halted.” “But,” he added, “in fact, the gold market could flare up over any-
thing.”49 Indeed, Johnson’s plan of action soon confronted new realities
that threatened to tie the threads of the balance of payments, Vietnam, and
the vulnerable dollar into a knot beyond undoing.
The bad news seemed endless. On the payments front, the latest statis-
tics were grim. The CEA informed the president in late December 1967 that
the fourth-quarter outflow had been nearly $2 billion, threatening “to turn
the year into a disaster” by creating a deficit that “may challenge 1960’s
unhappy record of $3.9 billion.”50 The economic fallout from Vietnam was
equally troubling. Inflation worsened, with consumer prices rising 0.3 per-
cent in January—the fourth straight monthly increase of that magnitude—
and the wholesale price index up 0.4 percent in January and 0.6 percent in
February. “Price increases,” warned the Bureau of Labor Statistics, “are
becoming more pervasive throughout the economy.”51 Moreover, the sur-
prise Tet Offensive at the end of January raised the distinct possibility that
even more U.S. troops would be committed to the struggle, with any such
commitment likely necessitating calling up of the reserves and a general
mobilization for war. Meanwhile, the administration began to despair over
passage of its tax surcharge proposal, with one official describing the atti-
tude in the House as “one of almost anarchistic willingness to pull down the
temple around their ears on the grounds that our budgetary expenditures
are out of control.”52 The tax hike difficulty was all the more vexing
because, as Rostow acknowledged, “it has become a symbol in Europe of
what the U.S. itself is willing to do.”53
On the dollar and gold front, still other problems worked to frustrate the
administration’s New Year’s plan. American efforts to calm the gold market
continued to be hampered by the failure of new gold production to meet
the liquidity requirements of the expanding world economy. The leveling
off of new gold production, rising industrial use, and heavy speculative
demand combined to draw down the total monetary gold stock; at the same
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parts to alert them that the United States might seek to close the gold mar-
kets.61 The administration postponed action so that Congress would have
time to pass the pending gold-cover legislation; Thursday, March 14—which
Fowler later called “one of the most hectic days of my life”—became the
day of decision.62 As LBJ met twice with his economic advisers, losses for
the day reached nearly $400 million. After much debate, the administration,
fearful that another’s day’s losses might run to $1 billion, asked the British to
shut down the London gold market on Friday and invited the central
bankers of the gold pool countries to Washington for an emergency meet-
ing over the weekend. When it proved impossible to reach some of the for-
eign officials by phone, Secretary of State Dean Rusk instructed the duty
officers at embassies and consulates across Europe to contact them “at
once, waking them if necessary.” Rusk closed with a flourish, “You must
track down these men at all costs.”63 The melodramatic tone was fitting.
Having prevailed upon the Bank of England to close the London gold mar-
ket and having invited to Washington the governors of the central banks of
the gold pool nations, Johnson quickly sought to drive home the message
that the price of gold would be held. In a March 15 telegram to West Ger-
many’s chancellor Kiesinger, LBJ observed, with a certain populistic
vengeance, “The speculators are banking on an increase in the official price
of gold. They are wrong.”64 The United States had blinked, unwilling to
play the game “to the last bar,” but it also refused to give the speculators
what they wanted— devaluation. The alternative was to shore up the Bret-
ton Woods system, and that the administration proceeded to do.
The crisis atmosphere of March 1968 produced several immediate
changes that, together, returned the international monetary system to
working order. The first of these was the implementation of a “two-tier sys-
tem” for gold transactions. The so-called Washington Communiqué issued
at the end of the weekend meetings made it clear that the gold market
would henceforth be separated into an official market, where monetary
gold for central banking purposes would be governed by dollar-gold con-
vertibility at $35 an ounce, and a private market, where gold for industrial
and speculative purposes would be governed by the basic laws of supply
and demand.65 As one Zurich banker put it, “The central bankers are saying
to the speculators: ‘Take it to the dentist.’”66 In effect, the central bankers
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were also saying that in the future they would meet their reserve and liquid-
ity needs through a new kind of “paper” international reserve asset rather
than through buying more gold. The concept behind the two-tier system
was not newly minted at the March 1968 conference; Guido Carli of the
Bank of Italy had advanced the idea back in November 1967. But two things
had changed in the interim. The plans for the new “paper gold” reserve
asset, on which any two-tiered arrangement would rely, were now much
farther advanced. And, as Arthur Okun has contended, the experience of
the crisis itself had an important effect: “I don’t think we could have gotten
the other countries on board if we had opted for . . . [the two-tier system]
earlier. They had bled a little, and they knew that some accommodations
had to be made. They wanted to stop their losses of gold . . . and they
became very enthusiastic about this.”67
A second immediate change to which the March crisis contributed
mightily was the removal of the American gold cover. The Washington
Communiqué noted specifically and approvingly that the removal of the
gold cover “makes the whole of the gold stock of the nation available for
defending the value of the dollar.”68 This, too, was a change long discussed.
As early as 1961, John Kennedy had been advised to seek repeal of the gold
cover commitment, but he feared that any such proposal by him would be
wrapped around his neck politically as “Democratic funny-money
finagling.”69 In 1965, Congressman Henry Reuss, a Wisconsin Democrat,
introduced a bill to eliminate the gold cover, but the initiative failed to win
support. Three such bills were introduced in the House and Senate in 1967,
and Fed chairman Martin publicly endorsed the proposed freeing of the
gold stock “for use as an international monetary reserve—the principal
function performed by gold today.”70 Resistance to the suggested change
centered on the fact that the gold cover dated back to the creation of the
Federal Reserve system and so enjoyed the imprimatur of both time and
financial probity.
Johnson asked Congress to remove the cover in his State of the Union
address on January 17, 1968, but winning congressional approval proved
difficult, and again the March crisis played a role. Treasury Under Secretary
Joseph Barr recalled that on the day the Senate voted on the measure, at the
peak of the gold crisis, Senate majority leader Mike Mansfield (D., Mont.)
called to report that he was no longer sure he had the votes. “So Fowler and
I and Bill Martin . . . sat down with the leadership on both sides . . .
explained to them that the crisis was getting worse and worse, and that if
we did not pass that bill that day, we might be forced to renege the next day
Growth Liberalism Comes a Cropper, 1968 > 83
on our promise to deliver gold.” Finally, at 7:30 in the evening, the Senate
approved the repeal of the gold cover by a 39–37 vote. In the future, all of
the nation’s gold stock would be placed behind its commitment to maintain
the price of gold and value of the dollar.71
The third immediate result of the March crisis was a renewed and
strengthened commitment to a reform already in the works—the creation
of a new form of international reserves, the Special Drawing Rights (SDR),
designed to serve as a form of paper gold to meet the liquidity needs of an
expanding world economy. Indeed, it was, as the Washington Communiqué
explicitly stated, the prospect that the SDR would soon be in place that
allowed the creation of the two-tier system. With the SDR on the horizon,
the central bankers of the gold pool states could agree that the existing
stock of monetary gold was sufficient and that they would no longer need
to buy gold from the market.72 The international reserves needed for future
economic growth could come from the new paper gold, which would be
used alongside real gold and the dollar for settling international accounts.
It is clear that the concept of the SDR was already well advanced by the
time of the March crisis. The congressional Joint Economic Committee had
as early as 1962 urged the creation of new methods for routinely increasing
international liquidity, and discussions on the matter continued among both
the Group of Ten and the International Monetary Fund in the mid-1960s.
The IMF approved an outline proposal for the creation of SDRs at its meet-
ing in Rio de Janeiro in September 1967, but working out the final details
proved to be a difficult and contentious task.73 Early in 1968, Time reported,
“There is one big hang-up: these ‘S.D.R.s’ will probably not be activated
until the U.S. and Britain markedly reduce their balance of payments defic-
its.” Business Week agreed that “the plan can’t be ratified before next year at
the earliest.”74 More devoted to the primacy of gold than other nations,
France in particular seemed to be dragging its feet.
Once again, the March crisis had an effect, more accelerative than causal
in the case of SDRs but significant nonetheless. A Group of Ten meeting in
Stockholm at the end of March finally settled the SDR issue. In the judg-
ment of Treasury Secretary Fowler, the gold crisis of mid-March had
pointed up the danger of continuing to depend on increased supplies of
gold at $35 an ounce as the monetary system’s source of additional liquidity:
“The gold crisis was draining away from, and reducing, the quantity of gold
held in the reserves of Central Banks. So there was a source of diminishing
liquidity. This underscored and, indeed, highlighted the need for the Special
Drawing Rights facility.”75
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work. Johnson touted the development of the SDR as a “historic step” that
“will prepare us for the era of expanding world trade and economic oppor-
tunity that unfolds before us.”79 At the end of July, Okun reported to the
president that “there is less of a crisis atmosphere now than at any time in
the past year”; in September, he noted that the “economy is advancing
strongly” and that “the unhealthy boomy pace of the first half has already
moderated.”80 Ironically, the balance of payments improved dramatically
over the course of 1968. The administration’s New Year’s program and the
tax hike helped to some extent, as did the unrest in Europe when France
suffered its May riots and the Soviets invaded Czechoslovakia. As a result,
Joseph Barr (who replaced Fowler as treasury secretary in December 1968)
recalled, “all the money ran out of Europe and came to the United States so
we ended up really in amazing statistical fashion.” By the end of the year,
the United States enjoyed a small surplus in its balance of payments, calcu-
lated on both the liquidity and the official transactions basis.81
Looking back, however, it is clear that the resolution of the 1968 eco-
nomic crisis bought breathing room but settled little. An analysis of how
the basic sources of the crisis played out in its aftermath makes the point.
The balance of payments quickly turned downward again, as even the trade
account (basically, exports and imports of goods and raw materials), long a
source of U.S. strength, sank into deficit in the face of stagnating productiv-
ity at home and increased global competition.82 The Vietnam War contin-
ued to generate inflationary pressures that would plague the economy, and
policymakers, into the 1970s and beyond. Johnson’s tax surcharge proved to
be too little too late, and appears to have had only a small effect on con-
sumer and business spending.83 Moreover, it was offset, much to the cha-
grin of Wilbur Mills, by the easing of credit by monetary authorities in the
latter half of 1968.84 Finally, despite the revamping of 1968, the Bretton
Woods international monetary regime was doomed by the continued eco-
nomic and political resurgence of Europe and Japan, and, after another
global monetary crisis in 1971, President Richard M. Nixon closed the gold
window, thus ending the era of dollar-gold convertibility. By 1973, a new
regime based on floating exchange rates had taken shape.85
IV. Reverberations
Thus, in the economic realm the 1968 crisis proved to be more revelatory
than revolutionary. Regarding the economy, the crisis was significant more
86 > More
for what it revealed than for what it changed. The episode illuminated
trends that could be accommodated and moderated but not arrested or
reversed. It revealed and contributed to both the passing of postwar U.S.
economic hegemony and the beginning of an awkward transition from the
postwar boom to a period of economic stagnation-cum-inflation—stagfla-
tion—which emerged unmistakably by the mid-1970s. (Indeed, the sugges-
tion of such a transition puts the Nixon presidency in a new light and offers
a new context and criterion for evaluating its record, in addition to those
provided by Watergate and the Cold War. That story is told in our next
chapter.)86 But such revelations aside, the most dramatic and concrete
results of the crisis of 1968 were not narrowly economic.
It was, rather, in the wider world of political economy, where economics
connects with the political culture and the social fabric, that the most signi-
ficant impact of the economic crisis of 1968 occurred. By early 1968, LBJ’s
attempt to fight a war in Southeast Asia while building the Great Society at
home had stretched the U.S. political economy to the breaking point. The
economic crisis that culminated in March coincided with the shock of the
Tet Offensive in Vietnam, which began on the last two days of January but
continued to dominate the war action through February and March. The
combined weight of these economic and military reversals finally wrecked
Johnson’s guns-and-butter policy. As a result, the administration was forced
to cap both the long escalation of the Vietnam War and the expansion of
the Great Society.
The events in Vietnam flared up with dramatic suddenness. At 2:35 on
the afternoon of January 30, a staffer called national security adviser Walt
Rostow out of the president’s regular Tuesday luncheon with his foreign
policy advisers—the so-called Tuesday cabinet—to relay a flash from the
national military command center. Returning to the meeting, Rostow
reported, “We have just been informed we are being heavily mortared in
Saigon. The Presidential Palace, our BOQs [bachelor officers’ quarters], the
Embassy and the city itself have been hit.” “This could be very bad,” the
president observed, adding without apparent self-consciousness, “This
looks like where we came in. Remember it was at Pleiku [in 1965] that they
hit our barracks and that we began to strike them in the north.”87 Johnson’s
immediate reaction highlighted the political problem posed by the commu-
nist attacks: If the Tet Offensive was reminiscent of “where we came in,”
how then to justify or even merely assess the intervening two and a half
years of U.S. warmaking?
Growth Liberalism Comes a Cropper, 1968 > 87
As word of the troop request leaked out to the press, observers outside
government made the connection as well. “The gold crisis . . . and a contin-
uing threat to the dollar,” wrote Hobart Rowen in the Washington Post, “are
bringing President Johnson face to face with basic questions on Vietnam
war policy. It is now clear that there are real limits to our financial
resources.” Writing in the New Republic that the sending of more troops to
Vietnam would risk “a collapse . . . of the international monetary system,”
Edwin Dale announced: “Someone had better tell the President, in so many
words, that if he puts into Vietnam the number of troops that now seem
required to restore and improve the situation there, he may throw away the
fruits of a generation of brilliant economic progress.”101
Johnson received just that message on a number of occasions in March
when he went outside the ranks of his immediate advisers to seek advice on
the troop request and related Vietnam issues. When the president sent
Clifford and Wheeler to canvass key congressional leaders, they found little
support for either a major troop commitment or a large reserve call-up.102
Both hawks and doves feared the economic consequences of an escalation.
Clifford subsequently reported to the Tuesday cabinet that Stuart Syming-
ton, a Democratic senator from Missouri and Cold War stalwart, “thinks we
should get out. He thinks the dollar will depreciate.”103 Johnson’s successor
as Senate majority leader, the dovish Mike Mansfield of Montana, explained
in a memo forwarded to the president that expanding the U.S. role in Viet-
nam would mean “more inflation, more balance-of-payments complication,
and possibly financial panic and collapse.”104
Still casting about for advice in late March, Johnson convened a group of
elder statesmen known as the “Wise Men.” The members of the group con-
stituted a virtual “who’s who” of the foreign policy establishment. They
had advised him before on the war (with “hawkish” results), and he turned
to them again to gauge just how much opinion had changed in the wake of
recent events. One key member was McGeorge Bundy, former national
security adviser to both Kennedy and Johnson. Bundy, too, recognized the
connection between the economic and the political. “I now understand,” he
wrote to Johnson, “that the really tough problem you have is the interlock
between the bad turn in the war, the critical need for a tax increase, and the
crisis of public confidence at home.”105 The most imposing, and imperious,
of the Wise Men, Dean Acheson, conveyed a similar opinion personally to
Johnson in mid-March and spoke forcefully when the Wise Men met with
the president on March 26. The United States, Acheson asserted, could not
prevail in Vietnam in a reasonable time with the means available. That fact,
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the tax bill remained uncertain, and the administration faced a possible defi-
cit of over $30 billion. Such a large shortfall would force interest rates up
and endanger both the British pound and the dollar. “Unless we get a tax bill
. . . [the situation] will be unthinkable.” But LBJ’s predicament did not end
there. The price of congressional approval for his tax increase would likely
be the sort of concomitant spending cuts demanded by Mills. Johnson
expected to be forced to make half the cuts in non-Vietnam defense expen-
ditures. “That will cause hell with Russell [Senator Richard Russell, chair-
man of the Senate Armed Services Committee]. If we don’t do that we will
have hell. What happens when you cut poverty, housing and education?”
Every way Johnson turned, his choices looked grim.111
The request for Vietnam reinforcements and a large-scale mobilization
only exacerbated the administration’s plight. “That would cost $15 billion.
That would hurt the dollar and the gold sic,” Johnson explained. “How can
we get the job done?” he asked plaintively. “We need more money in an
election year, more taxes in an election year, more troops in an election year
and more cuts in an election year.” There was, he added pointedly, “no sup-
port for the war.”112
Johnson concluded the meeting with his military leaders by asserting, “I
would give Westmoreland 206,000 men if he said he needed them [to stave
off a disastrous defeat] and if we could get them.”113 But Westmoreland
could not honestly couch his request in such terms. And the president real-
ized that to fulfill such a request would be to risk further disasters, both eco-
nomic and political. In the end, the lessening of the immediate military
pressure in Vietnam as the communist gains of the Tet Offensive were
rolled back, the difficulty in envisioning a likely scenario for American mili-
tary victory by doing “more of the same,” the erosion of popular support
for the war, and the realization that the costs of further escalation were
unacceptable at a time when the economy’s performance and institutional
underpinnings were already overstrained all came together to seal LBJ’s
decision to try a new tack in Vietnam.
On March 31, 1968, Johnson announced that the new troop commitment
to Vietnam would be limited to 13,500 additional support troops to bolster
the 11,000 combat troops airlifted to Vietnam immediately after the Tet
attack.114 Johnson also reported that new emphasis would be placed on
expanding South Vietnam’s role in its own defense. To help secure a politi-
cal resolution of the war, he named a new peace ambassador, Averell Harri-
man, and ordered a bombing halt over most of North Vietnam. Although
American forces would remain in combat in Vietnam for nearly five more
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years, the long, gradual escalation of U.S. involvement was at last capped.
Henceforth, emphasis would shift from prosecution of the war to extrica-
tion from it. The decision to halt the escalation of the war was as much eco-
nomic as it was political or military.115
The economic crisis of 1968 also directly influenced developments at
home. As he moved to cap the escalation of the war in Southeast Asia, John-
son came under increasing pressure to throttle back his domestic reforms as
well. On the Saturday morning in mid-March when central bankers from
the gold pool nations gathered at the Federal Reserve Building in Washing-
ton to salvage the international monetary regime, the president spoke to a
meeting of business leaders across town at the Sheraton Park Hotel: “We
must tighten our belts. We must adopt an austere program. . . . Hard
choices are going to have to be made in the next few days. Some desirable
programs of lesser priority and urgency are going to have to be
deferred.”116 The continuing failure to resolve the nation’s fiscal impasse
and the threatened collapse of the international monetary order forced on
the administration exactly the sort of “discipline of stringency” that LBJ’s
guns-and-butter policy had sought to avoid.
Admittedly, economic woes were not the only impediment to the expan-
sion of the Great Society in early 1968. Administrative difficulties, harden-
ing racial attitudes on all sides, and the apparent intractability of problems
such as poverty all contributed to the slowing of the administration’s
reform surge. The War on Poverty had proven to be politically divisive even
among old-line Democrats, and Johnson’s own reform ardor sometimes
showed signs of flagging. He was convinced that the poverty warriors of
the Office of Economic Opportunity were personally disloyal.117 Moreover,
in the spring of 1968 the president occasionally voiced bitter disappoint-
ment at the disaffection (and by implication, the ingratitude) of blacks and
the young, two groups he felt had benefited most from his reform efforts in
civil rights, poverty, and education.118
Personal pique notwithstanding, however, Johnson remained commit-
ted, in both word and deed, to his Great Society vision. In late 1967, he told
reporters that he wanted to leave as his legacy “a social consciousness in
concrete.” He had not enjoyed complete success in moving his programs
through Congress, he admitted, but “It’s only half-time now; there is still
another session of the 90th Congress to go.”119 As 1968 began, Johnson con-
tinued to press, in the words of a key aide, “almost frenetically” for further
reform. During the first two months of 1968 he sent to the Hill the largest
manpower program and most ambitious housing bill in U.S. history. He
Growth Liberalism Comes a Cropper, 1968 > 93
asked for a $290 million increase in appropriations for the OEO’s poverty
program, and in April signed into law the fair housing legislation he had
been seeking since 1966.120 The pace of reform, although no longer dizzy-
ing, remained substantial.
The face and substance of reform were changing, however, as financial
exigency chipped away at the administration’s reformist resolve even before
economic events reached crisis proportions in March 1968. In formally
requesting his tax surcharge from Congress in August 1967, Johnson had
tried to sweeten the deal by promising to make spending cuts. Britain’s
devaluation in November increased the pressure on the administration to
trim expenditures. At a special meeting called to assess the devaluation,
Johnson told his cabinet, “This weekend has made it even more obvious
that we must try to slash and stick with reductions in the Budget if we are to
save the Great Society and try to get a Tax Bill . . . if we are not to suffer seri-
ously.” Speaking of “a new era of economic challenge,” he exhorted his
department heads to “sharpen your pencils and be prepared.”121 Califano
urged the president to emphasize to the cabinet that “this program of cuts
is designed to preserve the Great Society programs” from those who would
use the failure to reach a compromise on the tax bill as an excuse to roll
back LBJ’s earlier Great Society triumphs entirely.122 In short, the adminis-
tration remained committed to reform, but under the pressure of a variety
of forces, not the least of them economic, the definition of that commit-
ment shifted increasingly from expanding reform to preserving it.
The reorientation from expansion to preservation was halting and
uncertain. Sometimes Johnson talked as though the two goals were inter-
changeable, but when on occasion he paid lip service to both in the same
breath, the tension between them became self-evident. “There is a philoso-
phy in the Congress,” Johnson told his cabinet in December 1967, “that we
have done enough . . . that we should slow down and tighten up what we
have done rather than undertake any new legislation. . . . I don’t agree.” But
he added immediately, “Whatever else we do, we have got to have a price
tag on everything we come up with. . . . We have got to know what every
new proposal costs and who will pay for it. . . . All of you have got to ask
that question. We are all good at saying what we need but we don’t know
who will pay for it.”123
The pressure to control social spending increased as the administration’s
economic problems worsened in early 1968. Less than twenty-four hours
before representing the United States at the emergency meeting of the gold
pool nations over the weekend of March 16–17, Fed chairman Martin told a
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Detroit audience, “It is time to stop pussyfooting, and get our accounts in
order. It is time to stop talking of guns and butter. We must face up to the
fact that this is a war economy.”124 “If I were dictator,” Johnson mused in
May 1968, near the end of the bruising tax hike struggle, “I wouldn’t be cut-
ting expenditures, I would raise them.”125 But he was not dictator, and in
the winter and spring of 1968 threatening economic developments forced
Johnson to accept spending cuts as the price for congressional approval of
the tax increase he believed the nation needed to stave off economic ruin.
The shift from expanding the Great Society to fighting to preserve it
touched off a season of political contention for the administration and its
liberal constituency. The issuance in February 1968 of the National Advi-
sory Commission on Civil Disorders report on the urban riots of the previ-
ous summer constituted an opening round. The commission, headed by
Governor Otto Kerner of Illinois, called for a massive expansion of the gov-
ernmental programs to deal with the ravages of white racism; its report
made over 150 recommendations, which Johnson estimated privately would
add between $75 and $100 billion to the federal budget over several years.126
The commission’s implicit indictment of previous efforts stung Johnson,
and he instructed Califano to pass the word that the report was “destroying
the President’s interest in things like this.”127 Johnson’s pique was familiar
to those who worked with him, an emotion to which he often succumbed
and which he also often overcame. More daunting were the fiscal realities
the president now confronted. “I am more practical,” he told a delegation of
black editors and publishers, “than some of those who wrote the report and
some of the staff who sent it to me. First thing we have got to do is find the
money. They didn’t touch upon that problem. It’s like saying we need sirloin
steaks three nights a week, but only have the money to pay for two steaks.”
“I will never understand,” he wrote later, “how the commission expected
me to get this same Congress to turn 180 degrees overnight and appropriate
an additional $30 billion for the same programs that it was demanding I cut
by $6 billion.”128
Organized labor pressed Johnson in a similar fashion. The American
Federation of Labor cautioned against any “moratorium on domestic
progress” and called instead for “a resurgence of a national determination
to create an ever-better society in America.” The AFL-CIO program for
1968 included legislation to make the federal government the employer of
last resort and denounced the very idea of cuts in social spending. Nor was
the AFL-CIO leadership sympathetic to the administration’s fears regarding
the international economy. Califano reported to Johnson that AFL-CIO
Growth Liberalism Comes a Cropper, 1968 > 95
president George Meany and his staff “believe the worst [consequence of]
separating the dollar from gold would be to shake up international trade for
a year or two without any serious repercussions here at home.”129 In the
end, the AFL-CIO agreed that the need for a tax increase was overwhelm-
ing, and it therefore grudgingly and silently acquiesced in the $6 billion
spending cut demanded by Mills and others as the quid pro quo for congres-
sional action.130
Liberals carried the fight to the administration’s inner councils. Califano
kept up a steady drumbeat, urging Johnson to “fight both the Congress and
[Treasury Secretary] Fowler on anything like a $6 billion expenditure
cut.”131 Johnson’s legislative liaison, Barefoot Sanders, shaken by the assassi-
nation of Martin Luther King Jr. and the rioting that followed in early April,
warned the president, “If, in the face of more numerous and more vocal calls for
additional government action, the government appears to do less, by cut-
ting appropriations in order to solve the financial crisis, we run the risk of
leaving these people who want more done without any hope for accom-
plishing their programs within either the Democratic or Republican par-
ties.”132 Following Sanders’s lead, Califano promptly took the offensive by
suggesting that any budget cuts come from such “low priority areas” as the
supersonic transport airplane program, the Apollo moon-shot program,
and federal highway expenditures. He implored Johnson to ask for an even
greater tax hike and to direct an additional $3 to $5 billion to “relatively
quick impact [social] programs.” “The argument against [such a course],”
he admitted, “is the balance of payments, the tax bill and Wilbur Mills.” But
perhaps the conventional wisdom of the Treasury Department regarding
the relationship among the balance of payments, fiscal policy, and domestic
priorities was based on false assumptions that had over time hardened into a
“mythology” opposed to social welfare. Califano suggested that LBJ under-
take “a thorough reassessment in the balance of payments and domestic
priorities area—a reassessment of the same magnitude you have gone
through with respect to Vietnam.”133 But Johnson’s angry marginal com-
ments on Califano’s memo were unambiguous: “No!” “I don’t agree.” “Tell
him to forget it—” “Ha!Ha!” “Forget it.”134
In the end, Califano and his fellow Great Society all-outers lost the battle
for LBJ’s mind on the issue of domestic priorities. Frightened by the March
gold crisis, Johnson decided that the tax surcharge was “the most urgent issue
facing the country” next to Vietnam. “I knew,” he later wrote, “that any call
for increased spending would give my opponents the excuse they sought to
call me a reckless spender and kill the tax bill. If that happened, it could bring
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fiscal 1969 expenditures, and the president refused to make further reduc-
tions on his own.141 Indeed, aggregate social welfare spending continued to
rise, in 1969 and throughout the Nixon years. But the 1968 episode did con-
stitute a sea change, because it shifted the emphasis from an expansion of
the Great Society to its preservation. In fiscal year 1969, federal social wel-
fare expenditures (in constant dollars) grew at a rate less than half that of
1965.142 As the historians Irwin and Debi Unger have written, “In June 1968
the Great Society, already badly wounded at the hands of its friends and
enemies alike, lost its forward movement and its inner spirit.” What was left
was not the powerful reform surge of mid-decade but only its inertia.143
In its aftershocks, the economic crisis of 1968 left a deep imprint on both
foreign affairs and domestic policy, on the history of a momentous year and
a remarkable historical era. Growth liberalism—the interpenetration of lib-
eral politics and growth economics—was a defining feature of the 1960s and
the apotheosis of the postwar optimism that undergirded the notion of an
American Century. In 1968 growth liberalism came a cropper and the Ameri-
can Century came to an end. The forces at work were many, the configura-
tion of causation complex. But matters of political economy were central.
The experience and consequences of the economic crisis of 1968 remind us
that the history of the 1960s was not written entirely in the streets.
4
greater than the total growth of the U.S. economy from 1790 to 1950—the
president asserted that the critical question was “not whether we will grow
but how we will use that growth.” Speaking of the nation’s need for “the lift
of a driving dream,” he proposed that “the time has come for a new quest—
a quest not for greater quantity of what we have but for a new quality of life
in America.” Nixon neither embraced the cult of production nor dismissed
it. Instead, as had the growth liberals who preceded him, he sought a way to
use growth to transcend growth, to shift society’s focus from quantity to
quality. The task, he declared, “is not to abandon growth but to redirect it.”
Growth would be a means rather than an end in itself, a way to achieve the
conservative societal rejuvenation that Nixon, ever the utopian opportunist,
worked hard to achieve.2
For an increasing number of Americans, however, Nixon’s dream was
the stuff of nightmares. The emergent environmental movement gave
strong voice to this alternative view, and the celebration in late April 1970 of
the first Earth Day—a national environmental “teach-in” modeled after the
anti-Vietnam War consciousness-raising sessions common on university
campuses in the mid-1960s—focused and amplified the sentiment. “A whole
society is coming to realize that it must drastically change course,”
observed Denis Hayes, the national head of Environmental Action, the
group coordinating Earth Day activities around the country.3 The new tack
was clear in outline, if not always in detail: The new environmental interest
group Friends of the Earth urged Earth Day participants to demonstrate
“ceaselessly” that continuous economic growth was “no longer healthy, but
a cancer”; the dangers posed by “the runaway U.S. growth economy”
justified “a thorough reassessment and reversal [sic] of unlimited economic
growth as a national goal.”4 Senator Edmund Muskie, the Democratic vice
presidential candidate in 1968 and the presumed front-runner for the presi-
dential nod in 1972, gave the new direction an air of legitimacy when he told
an Earth Day crowd at the University of Pennsylvania: “If progress means
technology that produces more kinds of things than we really want, more
kinds of things than we really need and more kinds of things than we can
live with, we had better redefine progress.”5
The first Earth Day celebrations did not create antigrowth ideas so much
as crystallize an animus that was already in the air and spreading quickly. By
the end of 1970, when the National Bureau of Economic Research spon-
sored a nationwide series of colloquia to celebrate its fiftieth anniversary,
the Yale economists James Tobin and William Nordhaus titled their fea-
tured paper “Is Growth Obsolete?” Reflecting their firsthand knowledge as
100 > More
veterans of the CEA, they recalled that in the 1960s growth had been “the
reigning fashion of political economy.” But the climate of opinion had
“changed dramatically”: “Disillusioned critics,” the economists reported,
“indict both economic science and economic policy for blind obeisance to
aggregate material ‘progress.’”6
The public debate about growth that took shape in 1970 continued
through the rest of the decade and constituted one of a number of changes
that, taken together, appeared to announce a decisive break with the past.
The dashing of liberal hopes at home, frustration and then defeat in South-
east Asia, the rise of the Soviet Union to nuclear parity, the loss of U.S. eco-
nomic independence and world economic dominance, the stagnation of
the vaunted American standard of living as the postwar economic boom
came decisively to an end—the pattern bespoke a new era of limits. Some
saw in that prospect an opportunity to save the fragile ecosystem and per-
haps the soul of the nation as well. But most Americans, truly the people
of plenty and the children of more, found the prospect of limits disquiet-
ing. In the face of such fundamental, reverberating change, American soci-
ety suffered a palpable loss of confidence and optimism. The idea of limits
seemed to contravene the psychic, as well as the material, dynamic of the
postwar experience.
Dealing with this new reality—the problems it presented, the anxieties
it generated, the possibilities it opened up, and the options it foreclosed—
constituted the most fundamental challenge to the nation’s political leader-
ship in the 1970s. By the end of the decade, President Jimmy Carter, in his
most famous public address, would speak to a national television audience
about America’s “crisis of confidence” and the “paralysis and stagnation and
drift” abroad in the land. (Commentators summed up the president’s por-
trait of woe with the word “malaise,” which stuck in the public memory
despite the fact that Carter himself never invoked the term.) Poignantly,
Carter reminded his audience that “we ourselves are the same Americans
who just 10 years ago put a man on the moon.”7 But those ten years repre-
sented more than a mere decade; the ten years after 1969 were, for the
United States, a time of diminished confidence and capabilities.
It fell to Richard Nixon to preside over the transition from the foreshortened
American Century to the new age of limits. The endeavor dominated his
Richard Nixon’s Whig Growthmanship > 101
Elliot Richardson, who headed the Departments of Defense and HEW and
also served as attorney general, has observed that “Nixon saw with . . . clar-
ity that the United States needed to adapt itself, and quite rapidly, to the end
of the era in which our margin of military and economic superiority was so
great that we could afford to neglect the careful delineation of U.S. interests
. . . and the husbanding of U.S. resources.”10 As a result, the synchronization
of aims and capabilities in a changing world became a central concern of
the Nixon presidency, both at home and abroad. The discipline of strin-
gency, visited so abruptly upon Johnson and the growth liberals in 1968, was
for Nixon a defining fact of life. The historical role perceived so clearly by
Lippmann gave Nixon’s leadership a significance that has been all but lost in
the swirl of scandal and controversy surrounding a leader still remembered,
not entirely unfairly, as Tricky Dick.
102 > More
The character of the Nixon presidency derived further from the often
discounted attitudes, the rudimentary ideology, that he brought to his his-
torical role. Arthur M. Schlesinger Jr. expressed the conventional wisdom of
liberals when he wrote in 1960 that Richard Nixon stood for “almost noth-
ing,” and William Rusher of the conservative National Review later agreed
that “to Nixon, it’s all a game of grub.”11 But the conventional wisdom of
both left and right about Nixon was, on this score, simply wrong. True,
throughout his long public career the Californian remained supremely
pragmatic and opportunistic. As Lippmann put it, “He will do anything he
thinks is expedient. . . . He’s very cunning.” But there was a pattern to
Nixon’s expediency. He inclined toward an identifiable set of core beliefs
and predilections. From Nixon’s arrival in the White House, John Ehrlich-
man recalled, the president “had a pretty well articulated sense of direction,
on the domestic side as well as the foreign policy side.”12
Nixon’s sense of direction hearkened back to the Whig ideology of mid-
nineteenth-century U.S. politics.13 The antebellum Whig Party was a loose
political coalition built around Henry Clay, Daniel Webster, and John C.
Calhoun. The Whigs championed national economic development, hoping,
as one historian has written, to use “the public promotion of economic
growth” to build “a material foundation for the maintenance of public
virtue.”14 They thus worked to square the circle by wedding progress to sta-
bility and order. On the societal level, the Whigs championed Henry Clay’s
famous “American System,” a program that called for a protective tariff, fed-
erally funded internal improvements, a strong national bank dedicated to a
stable currency, and a system for sharing federal revenue with the states for
specified purposes. On the individual level, they were preoccupied with self-
control, industriousness, and the cult of the “self-made man.”15
Certainly few American leaders have embodied the Whig personality
type as thoroughly as Richard Nixon. He was the archetypal self-made man
who can never stop striving; who, pitted always against weakness within
and adversity without, re-creates himself each day by dint of struggle. The
effort was constant and endless; the emphasis, as Garry Wills acutely
observed, always on “the process, not the destination; the rising, not having
risen.”16 “Struggle,” Nixon wrote revealingly, “is what makes us human
instead of animals.”17
Nixon was not merely an exemplar of the Whig personality type—he
was its avowed champion as well. The self-made man was at once a phe-
nomenon of individual psychology—the result of some powerful combina-
tion of nature and nurture—and a social creation, and Nixon worked hard
Richard Nixon’s Whig Growthmanship > 103
to encourage and celebrate his own traits in others. From the Checkers
speech in 1952 to his acceptance address at the Republican national conven-
tion in Miami in 1968, Nixon spoke to, and for, “the great majority of Amer-
icans, the forgotten Americans” who had succeeded to the American
Dream his way—by hard work rather than by native genius, social connec-
tions, or family wealth.18
Nixon’s Whig orientation manifested itself in his policy as well as his
personality. It colored his presidency in ways that confused people at the
time and have continued to confound commentators ever since. There was
about the Nixon presidency, the economic adviser Herbert Stein has noted,
a “general schizophrenia.”19 “His heart was on the right,” the speech writer
William Safire observed, “and his head was, with FDR, ‘slightly left of cen-
ter.’”20 Drawing a bead on the “real” Nixon was no easy task, then or now.
The real Nixon was the Whig Nixon, whose views and policies embod-
ied all the considerable tensions and ambiguities, as well as the essential
purposes, of the Whig tradition. He entered the White House, he claimed
in his memoirs, “determined to be an activist President in domestic affairs,”
but critics have had difficulty crediting such avowals. Most have seen only
Nixon’s genuinely conservative instincts and intentions, emphasizing his
unmistakable antipathy toward the Great Society and what one historian
has called his desire to “turn the country away from the New Deal tradi-
tions.”21 But Nixon was complicated in this as in so many other regards: his
conservative, anti-New Deal instincts coexisted with a genuine activist bent.
“He wanted to use the power of the presidency,” Herbert Stein has
observed. “He just didn’t believe that those other two million people in the
federal government were capable of doing anything, or would do it if he
told them.” The result was a curious ambivalence: Nixon believed in mini-
mal federal intervention in the economy, but also thought, in Stein’s words,
that “great presidents were activist presidents.”22
Whig principles allowed Nixon to reconcile such opposing impulses, to
be “modern” while championing traditional virtues, to pursue both
progress and order. Nixon could never bring himself simply to endorse the
status quo. “That,” he told reporters, “is completely contrary to the Ameri-
can tradition.” The United States was “a ‘go-ahead,’ not a ‘stand-still,’ coun-
try.” Americans wanted “change that works, not radical change, not
destructive change, but change that builds rather than destroys.”23
In pursuing sensible change, Nixon identified with a historical figure
who, like himself, defied easy categorization—Benjamin Disraeli. When
domestic affairs adviser Daniel Patrick Moynihan recommended that the
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the United States would give its allies the protection of its nuclear umbrella
against threats coming from nuclear superpower adversaries and would
fulfill existing treaty obligations to furnish military and economic aid in the
face of lesser threats, but the manpower to meet non-nuclear aggression
would be the responsibility of the nation directly threatened. There would
be no more Vietnams. “Neither the defense nor the development of other
nations can be exclusively or primarily an American undertaking,” he elabo-
rated. “We shall be faithful to our treaty commitments, but we shall reduce
our involvement and our presence in other nations’ affairs.”36 The Nixon
Doctrine was, in the words of a prominent student of foreign affairs,
“essentially a rationale for retrenchment.”37
Nixon and Kissinger also developed the concept of “linkage” to ensure
that whatever actions the United States did take in world affairs would have
the maximum possible results. The president and his national security
adviser believed that “the great issues are fundamentally interrelated” and
that progress in any one area of contention needed to be tied to progress on
other political, economic, or military issues. Linkage reflected both the per-
ceived complexity and interrelatedness of world affairs and the need, as
Kissinger later explained, “to free our foreign policy from oscillations
between overextension and isolation and to ground it in a firm conception
of the national interest.”38 Viewed by opponents at the time as a risky
device that would inevitably encourage foot-dragging by a hard-line anti-
communist administration, linkage was in reality an economic calculus for
a new regime of limits, an attempt to avoid overextension by leveraging dis-
crete diplomatic (and ultimately economic) inputs into broad payoffs.39
In time, the administration placed both the Nixon Doctrine and the con-
cept of linkage in the service of its grandest strategic conception: détente.
Nixon and Kissinger sought a relaxation of tension with America’s super-
power adversaries, the Soviet Union and the People’s Republic of China, for
a multitude of reasons; not least among them was the need to adjust to a
new epoch. As Kissinger explained in mid-1970, “We are doing what we are
doing because we believe that if America is to remain related to the world it
must define a relationship that we can sustain over an indefinite period.”40
Détente constituted a return to an asymmetrical formulation of contain-
ment. It reflected Kissinger’s insight that “no country can act wisely simulta-
neously in every part of the globe at every moment of time” and accepted
the hard reality of limits made so unmistakably evident by the Vietnam
debacle.41 The logic of détente implicitly admitted that the resources even of
the United States were finite. Nixon and Kissinger never intended détente to
Richard Nixon’s Whig Growthmanship > 107
end or supersede the Cold War, but rather they believed that the strategy
would enable the United States to continue its Cold War mastery with less
danger and at lower and more easily sustained economic and political costs.
Détente aimed, in the words of one analyst, “to manage the retreat of the
United States from its lonely pre-eminence in world affairs back to a status
more like first among equals.”42
Nixon pursued an analogous course at home. “I wanted to be an activist
President in domestic policy,” he later wrote, “but I wanted to be certain
that the things we did had a chance of working.” Domestically as well as
internationally, the Republican administration worked to bring commit-
ments in line with capabilities, especially in the wake of what Nixon viewed
as growth liberalism’s “misguided crash program” under JFK and LBJ.43
The Nixon Doctrine, the president suggested to the journalist Theodore
White in early 1973, had a domestic counterpart in the administration’s pro-
gram of revenue sharing.44 A key element in the domestic agenda Nixon
labeled the “New Federalism,” revenue sharing returned federal tax rev-
enues to state and local governments for use as they saw fit: general revenue
sharing provided no-strings federal grants, and special revenue sharing pro-
vided federal funds in the form of block grants for state and local projects in
specified areas, including job training and community development. Like
the Nixon Doctrine abroad, revenue sharing addressed the problem of
seemingly excessive commitments by means of devolution, the shifting of
important responsibility away from the center to the locality.
The other components of Nixon’s New Federalism complemented rev-
enue sharing. The administration’s various attempts at federal government
reorganization and its revolutionary proposal of a guaranteed annual
income were intended, Nixon said, to “close the gap between promise and
performance” and “make government run better at less cost.”45 The start-
up costs of such reforms would be considerable, the president admitted, but
the projected cost of continuing the present system into the 1970s was “stag-
gering.”46 At bottom, Nixon’s domestic reforms sought to rationalize gov-
ernment—and, if successful, the effort would prove a bargain.
The uneven results of Nixon’s New Federalism agenda have made it
difficult to take the measure of his domestic record, either at the time or
since. Several key legislative initiatives failed to pass. Welfare reform died a
lingering death at the hands of an unusual coalition of antiwelfare conserv-
atives and anti-Nixon liberals. The administration won approval of general
revenue sharing, but failed to gain approval of special revenue sharing in a
number of controversial areas. Government reorganization became the
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In the months following his Kansas City speech, Nixon moved dramatically
to incorporate a policy of robust economic growth into his preparation for
110 > More
most important” one. A more appropriate theme, the CEA suggested, was
the “goal-directed” nature of administration policy—the willingness and
ability to choose, “balancing alternatives against each other and recognizing
the limits of our total resources.”60 In the face of such ambivalence and
opposition, Safire’s idea went nowhere.
Ironically, the passage of time proved Safire more premature than wrong,
however. In the years that followed, the press of events combined with
Nixon’s personality, philosophy, strategic vision, and political calculation to
incline the administration’s economic policy increasingly toward a growth
orientation. The movement was slow at first, then stunningly swift. At the
outset, the administration saw the Vietnam inflation as its major problem.
McCracken alerted the cabinet in March 1969 that “skepticism and growing
inflation-mindedness are disorganizing the economy. The problem was
inherited, but responsibility for a solution is now ours.”61 Accordingly, the
administration devised an economic “game plan” that sought, McCracken
told Congress, to “slow down the growth of total demand gradually.”62 The
policy of “gradualism” relied on the traditional weapons of fiscal and mon-
etary restraint to slow the economy and curb inflation. The existing 10 per-
cent income tax surcharge was extended and the investment tax credit was
repealed; growth in the money supply slowed from 7.9 percent in the sec-
ond half of 1968 to less than 5 percent in mid-1969.63
Gradualism proved to be a delicate policy. The trick, of course, was to
throttle back the economy just enough to stifle inflation, but not so much
or so fast as to create an economically and politically painful recession.
Although he was neither very interested nor particularly well versed in eco-
nomics, Nixon had several bedrock beliefs; chief among them was what
Herb Stein has called “a phobia about unemployment.”64 Nixon especially
feared the electoral consequences of rising joblessness. His view derived in
part from his conviction that rising unemployment during the recessions of
1954 and 1958 had hurt the Republicans badly in congressional races and that
increased joblessness during his 1960 presidential campaign against John F.
Kennedy had cost him the White House.65 The lesson seemed to be that
inflation was bad but unemployment was worse. As Nixon explained to his
Cabinet Committee on Economic Policy (playfully dubbed the CABCOM-
MECOPOL by William Safire), “When you start talking about inflation in
the abstract, it is hard to make people understand. But when unemploy-
ment goes up one-half of one percent, that’s dynamite.” “We’ll take infla-
tion if necessary,” he told his domestic adviser John Ehrlichman, “but we
can’t take unemployment.”66 Moreover, Nixon’s partisan concern was rein-
Richard Nixon’s Whig Growthmanship > 113
forced by the dire analysis of his domestic adviser Daniel Patrick Moynihan,
who warned in February 1970: “If a serious economic recession were to
come along to compound the controversies of race, Vietnam, and cultural
alienation, the nation could indeed approach instability.”67
Gradualism chaffed in other ways as well. It seemed stodgy. As
McCracken told a meeting of top economic policymakers at the end of
Nixon’s first year in office, “Policies have tightened, but results have moved
into the picture with glacial speed.” For Nixon, gradualism was the eco-
nomic equivalent of the gridiron strategy of “three yards and a cloud of
dust”—and he was at heart a devotee of the long bomb in both football and
public policy.68
In the end, despite close monitoring by Nixon’s economic advisers, grad-
ualism’s combination of fiscal austerity and monetary restraint overshot the
mark and helped nudge the economy into a mild recession. In February
1970, McCracken reported, “The economy is now beginning to show visible
results from earlier policies of restraint. Skepticism as to whether the poli-
cies would ever really bite is now giving way to worry about ‘overdoing it.’”
Soon the economy was mired in a new condition—”stagflation”—which
combined the problem of inflation with sluggish output and rising unem-
ployment. In May, McCracken reported to the cabinet, “The economy has
had its disappointing developments this year. It has been weaker than we
had expected. Unemployment has risen more sharply. Price developments
have been more stubborn.” In July 1970, Nixon met with top economic
advisers and concluded that the “major battle is recession, not inflation.”69
Confronting an increasingly challenging (and politically threatening)
economic situation, the administration abandoned gradualism—gradually.
By late August, McCracken told the president that “we have reached at least
a ‘review point’ if not a decision point. . . . This phase has worked out about
as well as such a distasteful episode can.” The task now, he continued, was
to decide what constituted an “optimum” path for the economy in the year
ahead and how that path could be achieved.70
In the final months of 1970, Nixon and his advisers decided to move
aggressively to stimulate the economy. In part, the turn in policy was dic-
tated by the state of economic affairs: the recession Nixon had feared was
now a well-established reality. In part, the change in strategy also consti-
tuted a political response to the unexpectedly strong Democratic gains in
the November 1970 off-year congressional elections and to what Stein deli-
cately referred to as the growing “gap between where we’ll probably be and
where we would like to be in [the presidential election year] 1972.”71 Finally,
114 > More
ber 1970. On the heels of the Connally nomination, Nixon repeated the
message to the Fed chairman: “Domestically we should err on the side of a
too-liberal monetary policy, Arthur. We should risk some inflation.”76 As a
result of such prompting and its own independent assessment, the Fed
increased the stock of money at an annual rate of almost 6 percent in the
first half of 1970, nearly 5 percent in the second half, and roughly 10 percent
in the first six months of 1971.77
Nixon opened up the administration’s fiscal policy as well. He used the
occasion of his January 1971 State of the Union address to announce an
expansionary budget for the next fiscal year, and highlighted the concept of
a full employment budget “designed to be in balance if the economy were
operating at its peak potential.” Since the economy was in fact mired in a
recession, such a budget guaranteed an expansionary deficit. “By spending
as if we were at full employment,” the president oversimplified, “we will
help to bring about full employment.”78 Submitting his full employment
budget to Congress a week later, he reaffirmed his determination “to take
an activist role in bringing about . . . prosperity . . . [and] creating the cli-
mate that will lead to steady economic growth with improving productivity
and job stability.”79 All over America, jaws dropped when Nixon told the
press, “Now I am Keynesian, as I have duly noted.”80
In order to guide policy during the expansion, the administration in
January 1971 predicted a GNP of $1,065 billion for the calendar year. It was
a very good scenario, indeed. While Stein privately described the esti-
mate as “desirable,” “feasible,” and “probable,” McCracken admitted to
the president that “this $1,065 is ambitious.”81 The $1,065 billion figure
entailed a 9 percent jump in GNP over 1970, at a time when most private
projections foresaw an increase of only 7 to 8 percent. The economist
Paul Samuelson called the administration’s forecast “poppycock,” and
Arthur Okun reported that the $1,065 figure “startled and puzzled the
profession.”82 The explanation for the optimism of the official figure was
simple if not self-evident: the administration viewed the $1,065 figure as a
target as well as a prediction, a goal whose very existence would disci-
pline policy and convey forcefully to the Fed the necessity for an expan-
sive monetary policy. “Now that we are all agreed that $1065 billion is our
target and that it can be achieved,” wrote Stein, “all that is required is to
do it.”83
Just “doing it” proved difficult, however. The move away from gradual-
ism became itself too gradual, as the economic recovery proceeded at a dis-
tressingly slow pace. As Nixon subsequently recalled:
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The economy remained sluggish in the early months of 1971. There were signs of
improvement ahead, but patience had worn thin and we ran out of time. Demands
for action poured down on the White House from all sides. Media criticism of our
policies became intense. Republicans as well as Democrats reflected the pressure they
were receiving from their constituents and vociferously called for new policies.84
political scientist Joanne Gowa has written, “Officials in the Nixon adminis-
tration confronted a stark choice. They could preserve U.S. autonomy in
making domestic economic policy or they could try to preserve an estab-
lished network of economic relationships that had returned substantial,
albeit diminishing, benefits to the United States.”93
Nixon and his advisers saw their predicament clearly. In the president’s
1973 Economic Report, they explained:
afoot. “This could be the most important weekend in the history of eco-
nomics since March 4, 1933,” the avuncular economist replied. It had some-
thing to do, he elaborated, with “closing the gold window,” a phrase that
held little meaning for a speech writer who had never taken economics in
college. When Safire repeated his newly acquired nugget of information to
a treasury official seated beside him, the latter pitched forward with his face
in his hands and whispered, “My God!” At that, even Safire realized some-
thing big was in the offing.96
Others came to the Camp David meeting with a clearer conception of
why they were there. Nixon and Connally had for several months been dis-
cussing how to expand the domestic economy while simultaneously
addressing the related problems of inflation and the international standing
of the dollar. A further spur to action came in mid-July when Nixon held a
congressional briefing to discuss his upcoming trip to China, only to find, he
later recounted, that “for every one who expressed support of that dramatic
foreign initiative, at least twice as many used the opportunity to express
concern about our domestic economic policies and to urge new actions to
deal with the problems of unemployment and inflation.”97 As the congres-
sional leaders left, Nixon asked Connally to consult privately with other
senior economic advisers and formulate a new action program.
Connally fulfilled his assignment in a fashion that fully justified Nixon’s
faith in him as a “big play” man. On August 2, the two men discussed Con-
nally’s tentative plan, which included an investment tax credit to stimulate
the economy, a wage and price freeze to stem inflation, an import tax to
help the balance of payments, and the termination of dollar-gold convert-
ibility to protect the dollar. In his diary entry for the day, Haldeman called
the proposal “a huge economic breakthrough” and “a rather momentous
decision.” Nixon later described Connally’s plan as “in effect, total war on
all economic fronts.” Recognizing the sweeping nature of his proposal,
Connally told the president, “I am not sure this program will work. But I am
sure that anything less will not work.”98
The president and his advisers agreed to mull over the plan, but events
soon forced their hand. In early August, the dollar came under increasing
pressure in the European exchange markets and the price of gold rose to
nearly $44 an ounce, its highest level since the introduction of the two-tier
system in 1968. Reports that the British were requesting the conversion of
$3 billion into gold added to a growing sense of crisis. (In fact, the British
asked not for conversion but for a guarantee of their dollars against loss in
case the United States devalued.) On August 12, Connally cut short a Texas
vacation and returned to Washington to warn Nixon that the situation was
120 > More
deteriorating daily. That evening, the two men agreed to hammer out a
final program with key advisers and announce the result immediately.
“We’ll cover the whole thing when we do it,” Haldeman noted in his diary
that night, “so it’s going to be quite an earthshaking operation.”99
The discussions at Camp David began Friday afternoon, August 13, and
lasted until the next evening. The matter of greatest controversy was the
question of whether to close the gold window. Burns argued strenuously
against ending convertibility, contending that such a fundamental alteration
of the Bretton Woods system would pose grave political and economic
risks. Politically, the Communist world would gain a propaganda victory—
the weakness of world capitalism revealed!—and Nixon’s partisan adver-
saries at home would attack him for abandoning a gold exchange system
that enjoyed almost religious standing among conservatives. Burns also
warned against the unpredictability of the economic results that might fol-
low: “We are releasing forces that we need not release.” But the decision
went against the Fed chairman when, in the end, Nixon sided with those
who believed, as George Shultz had told him earlier, “that, while we will be
cooperative in international problems, our domestic economy and its orderly
expansion come first.”100
The package finally agreed upon committed the administration to
action on three related fronts. First, to grow the economy—the goal that
had brought affairs to this pass—the New Economic Policy included a 10
percent investment tax credit, a repeal of the existing 7 percent federal
excise tax on automobiles, and the early implementation of a previously
scheduled increase in personal income tax exemptions. The CEA estimated
that the NEP would through these policies raise the 1972 GNP by $15 billion,
equal to 1.3 percent of GNP for 1972 operating at full employment, and
would reduce the unemployment rate for 1972 by approximately 0.4 per-
cent.101 Second, to offset the inflationary potential of such stimulative
actions, the NEP included a $4.7 billion cut in federal spending and a tempo-
rary postponement of the administration’s revenue sharing and welfare
reform initiatives, as well as an executive order freezing all wages and prices
for a period of ninety days, with the promise of further action to ensure
wage and price stability thereafter. Third, the NEP took steps to protect the
dollar, both in the face of market forces arrayed against it and in the wake of
the NEP’s other changes. These included the termination of dollar-gold
convertibility and a commitment to press for a new international monetary
system. In addition, there would be a temporary 10 percent tax on imports,
which the administration believed would contribute on all fronts. Overall,
Richard Nixon’s Whig Growthmanship > 121
McCracken observed privately to the president, the NEP dealt “in an inte-
grated way with the three major policy problems of the U.S. economy—
inflation; unemployment and economic slack; and an imbalance in our
external economic position.”102
With the final outline of the NEP in hand, Nixon hurried to make the
program public in order to head off leaks and speculation of either a jour-
nalistic or financial nature. On Sunday evening, the president told a national
television audience that “the time has come for a new economic policy for
the United States.” “We are going to take . . . action,” he promised in an
understatement, “not timidly, not halfheartedly, and not in piecemeal fash-
ion.” In conveying his own rough draft of the address to Safire for polishing,
Nixon had instructed his speech writer to downplay “the gobbledygook
about [a] crisis of international monetary affairs” and concentrate on “emo-
tional feel, lift.” Accordingly, the president concluded his live broadcast by
calling for Americans to use the departure of the NEP “to help us snap out
of the self-doubt . . . [and] self-disparagement that saps our energy and
erodes our confidence.” By using the NEP to meet the challenge of global
economic competition, the United States could ensure that “our best days
lie ahead.”103
In the campaign to “sell” the NEP that followed, Nixon emphasized the
theme of national renewal. Briefing administration officials the very next
day, he invoked the message of his earlier Kansas City Doctrine: Americans
could no longer “just assume” economic preeminence. “We must recognize
that this is a period of peaceful challenge for peaceful competition [sic] and
that American industry . . . labor . . . [and] government . . . must find ways to
be more efficient, more productive, if we are going to maintain our posi-
tion.” The United States needed to succeed in the new global economy in
order to “play the role we were destined to play of being the strongest
nation in the world” and because “whenever a person or a nation quits try-
ing to do its best, quits trying to be number one, something goes out of that
person or . . . nation.”104
Having rallied his own troops, Nixon embarked on a whirlwind cross-
country tour to drum up popular support for the NEP. In New York City, he
asked an international gathering of the Knights of Columbus, “Do we have
the character, the richness in spirit, and the strength in spirit that a nation
needs?” The answer, he suggested, would come in “what we do with the
challenge of peaceful competition, [and] what we fail to do.” Traveling to
Springfield, Illinois, he invoked the spirit of Lincoln, calling on Americans
to “revitalize in ourselves” Lincoln’s sense of destiny and strong competi-
122 > More
tive spirit. Stopping at Idaho Falls, Idaho, the president spoke of “a new era
of competition with other nations” and promised, “We are going to make
America strong. We are going to make it grow.” To the Veterans of Foreign
Wars convention in Dallas: “The new prosperity we seek is in no sense a
cushion of a self-indulgent old age in this Republic; rather, it will serve as a
launching pad for new greatness in America’s third century.” Even after the
trip ended, Nixon continued to sound the same themes. The dedication of
the Air Force Museum in Dayton, Ohio, in early September occasioned
remarks about a new era of international competition in aviation and “all
areas”; on Labor Day the traditional presidential remarks focused on the
singular importance of increasing productivity, lest the United States “relax
. . . and fall behind” in the emerging economic contest. “America,” Nixon
told a joint session of Congress in a nationally televised address on the NEP
on September 9, “can be her true self only when she is engaged in a great
enterprise.” The new global competition would provide that enterprise.105
It is tempting to dismiss Nixon’s rhetoric as nothing more than a huck-
ster’s pitch, but to do that cheats us of a full appreciation both of the moti-
vation behind the NEP and of the larger dimensions of Nixon’s
growthmanship. As we have seen, although the wage-price freeze and the
closing of the gold window were the most discussed (and probably the most
remembered) aspects of the NEP, the basic impetus behind those moves
was the desire to spur the growth of the domestic economy. And what of
the turn to growth itself ? What drove it? Here we might profitably invoke a
distinction Nixon himself drew in his memoirs between the economics of
economics and the politics of economics.106
As a matter of economics, Nixon’s pursuit of growth was a straightfor-
ward response to a prosaic problem: the recession of 1969-70 and the econ-
omy’s subsequent sluggish recovery. At the same time, the turn to growth
was an exercise in the politics of economics. Nixon was acutely conscious of
the political danger posed by rising unemployment. “All the speeches, televi-
sion broadcasts, and precinct work in the world could not counteract” the
negative political impact of an economic downturn, he had written in
1962.107 Moreover, Nixon and his advisers wanted to pump up the economy
in order to position the Republicans for the 1972 election. Meeting with
Haldeman, Ehrlichman, and Shultz in late 1970, Nixon insisted, “The trend
must be improving in ’72.” White House aide Patrick Buchanan has recalled
that the administration was “anxious not to enter a presidential year with the
economy running at less than breakneck speed.”108 Thus, Nixon’s turn to
growth beginning in late 1970 represented both competent leadership and
Richard Nixon’s Whig Growthmanship > 123
Graham agreed, Haldeman recorded, “but expanded that what this country
needs from the P [president] is a very strong challenge.” The times required
“a call to the people that taxes them and requires them to sacrifice and
work, such as Kennedy did rhetorically but never . . . substantively.”113
Graham’s suggestion that the president issue a Kennedyesque call to
duty and greatness fell on receptive ears, for Nixon, to a degree that often
astonished and infuriated his critics, fancied himself a moral leader. “The
primary contribution a President can make,” he had written earlier, “is a
Spiritual uplift”; hence Nixon’s repeated mention—in the speech that
kicked off his 1968 campaign for the presidency in New Hampshire and in
two subsequent State of the Union addresses—of the nation’s need for “the
lift of a driving dream.”114 Nixon prepared his Kansas City Doctrine with
that need in mind. As his notes for that briefing make clear, he believed the
“National spirit” was “most important”; Americans needed “confidence in
selves,” “faith in our principles,” and what Nixon called “the Spirit of
Vigor,” which included “courage . . . stamina . . . [and the] character which
[the] nation had in youth.”115 The NEP translated Nixon’s vision of the
post–Cold War order into policy; it was intended both to position the
United States for the coming economic struggle and, no less important, at
the same time to fire the American spirit anew.
Spiritual considerations were much on Nixon’s mind as he and his staff
devised the NEP at Camp David. On the Saturday evening after the hard
decisions had been made, Haldeman, Ehrlichman, and Weinberger visited
the president’s quarters in the Aspen lodge and found Nixon in what Halde-
man described in his diary as “one of his sort of mystic moods,” in his study
with the lights off and a fire roaring despite the late summer heat outside.
Nixon told his visitors that this was where he made all his big decisions.
“We’re at a time where we’re ending a period where we were saying that
the government should do everything,” he explained. “Now all of this will
fall unless people respond. We’ve got to change the spirit. . . . You must have
a goal greater than self, either a nation or a person, or you can’t be
great.”116 The same day, Nixon told Safire privately that “all Americans, not
just our government but our people should welcome the . . . necessity, the
opportunity, the excitement of meeting the challenge of competition.”117
Through such an undertaking, the American people, led by a self-made
man, would remake themselves.
The contest would build character, both individual and national. Critics
might complain that, as driving dreams go, this was pretty thin gruel, but
Nixon’s blending of the material and the spiritual demonstrated forcefully
Richard Nixon’s Whig Growthmanship > 125
how malleable the concept of growth could be: just as growth liberals in the
1960s had promised world hegemony and the social reconstruction of
America to liberal specifications, now Richard Nixon promised continued
world leadership and the moral rejuvenation of the American people
according to conservative lights. And there was one other similarity that
Nixon’s Whig growthmanship shared with the growth liberalism that pre-
ceded—it, too, failed.
The Watergate affair brought down the Nixon presidency almost exactly
three years after the launching of the NEP, but by then the administration’s
growth strategy already lay in ruins. Economic stimulation paid substantial,
short-run political dividends in Nixon’s drive for reelection in 1972, but the
ultimate price of those short-term gains proved high indeed. An economic
initiative, a geopolitical stratagem, a spiritual crusade—Whig growthman-
ship foundered on every count.
The economic consequences of Nixon’s Whig growthmanship were
more negative than positive, largely because in the end the administration
spurred the economy too hard. Soon after unveiling the NEP, policymakers
began to worry that its stimulative impact would fall short of what was
needed to rachet the economy onto an acceptably robust growth path. In
mid-October 1971, McCracken warned that the economy remained on a
“path of sluggish expansion,” and his replacement as CEA chairman, Her-
bert Stein, advised Nixon at the end of the year to look “for ways to pump up
the economy more rapidly.” At the same time, the initial success of the
NEP’s wage and price controls lulled policymakers into thinking that the
economy could easily accommodate more stimulus without reigniting infla-
tion. As Stein later observed ruefully, “We did not foresee that the initial
apparent success of the controls would seduce us into excessively expan-
sionary fiscal and monetary policy.”118
Falsely reassured, the administration pulled out all the stops in early
1972. “We should push forward,” Stein exhorted, “with the fiscal and mone-
tary expansion on which the rise of the economy is predicated.”119 At the
Fed, Arthur Burns agreed, although sometimes grudgingly, and in the delib-
erations of the Federal Open Market Committee he advocated a more
aggressive policy of monetary expansion.120 During calendar 1972, the
money supply (M-1, consisting of currency and demand deposits) increased
126 > More
economists nor policymakers seemed able to explain, much less reverse, the
unhappy conjunction of soaring prices, low capacity operation, and rising
unemployment.
Moreover, American policymakers struggled with several problems
unique to the U.S. economy. The entry into the job market at this time of
the baby boomers, born after World War II and now seeking employment
in massive numbers, swelled the U.S. labor force by 40 percent over the 1965-
80 period. The economy had to create an unprecedented number of new
jobs merely to keep pace with the demographic onslaught.134 The influx of
young workers, together with the entry of large numbers of relatively inex-
perienced women into the workforce beginning in the late 1960s, also con-
tributed to a significant drop-off in the economy’s rate of productivity
increase. Other developments, including falling capital investment rates,
reduced research and development spending (as a percentage of GNP), and
increasing government regulation, compounded the productivity problem.
The discernible secular shift in national output away from goods and
toward services, where productivity increases were more difficult to realize,
also hurt. The end result was an economy whose gains in efficiency were,
for a variety of reasons, slowing notably.135
At the same time, resurgent international competition was bringing
heavy pressure to bear on U.S. firms. Although the United States still gener-
ated 30 percent of the world’s total GNP in 1970, America’s traditional com-
petitors in Europe and Japan, temporarily laid low by the devastation of
World War II, were returning to the economic fray armed with modern
plants and equipment and unencumbered by the heavy military burdens
shouldered by the superpowers. The so-called NICs (newly industrializing
countries) such as South Korea, Taiwan, and Brazil also made inroads into
the foreign and domestic markets of the U.S. firms. Between 1969 and 1979,
the value of imports to the United States nearly doubled, and American
exporters found themselves engaged in ferocious competition in many sec-
tors that they had previously dominated.136 Although Nixon and his advis-
ers had correctly predicted the coming of the global economy, just how
difficult the transition to that new order would be surprised them—and
most other Americans as well. While it is indisputably correct to fault
Nixon’s NEP for its contribution to the powerful negative currents running
through both the world and domestic economies in the early 1970s, it is
hard, even after the fact, to envision a hypothetical approach that could have
guaranteed a smooth path for the U.S. economy as it moved from hege-
mony during a golden age to mere equality in a time of troubles.
Richard Nixon’s Whig Growthmanship > 131
I. Sources of Discontent
The attack on growth came from far and near. A surprisingly influential
source of discontent was Britain, where ambivalence about growth had for
The Retreat from Growth in the 1970s > 133
over a century contributed to the economic stagnation that lately went by the
name “the English disease.”2 In 1967, Ezra J. Mishan, an instructor at the Lon-
don School of Economics, extended Galbraith’s analysis into an unrelenting
attack on what he characterized as “growthmania.” Whereas the American
economist had held out the hope that a better allocation of resources could
make growth into a positive force, Mishan warned his readers that “no sign of
any such optimism about the future will be found lurking in any corner of
this essay.” Instead, he argued that continued economic growth was “more
likely on balance to reduce rather than increase social welfare.”3
Nostalgia for a simpler past suffused Mishan’s analysis and was, indeed,
characteristic of the British critique of growth. The “promised land of
Newfanglia” had yielded mainly despoilers and polluters—the modern air-
liner and automobile stood out—and Mishan longed for “the rich local life
centered on township, parish and village” that had long since been
“uprooted and blown away by the winds of change.” A similar wistfulness
constituted the major theme of Peter Laslett’s evocatively titled The World
We Have Lost, a well-received historical reconstruction of everyday life in
preindustrial Britain. Before the industrial revolution enshrined “progress,”
Laslett wrote, “the whole of life went forward in the family, in a circle of
loved, familiar faces, known and fondled objects, all to human size.” The
story since, he implied strongly, had been one of declension, in the quality of
life if not the quantity of things. Laslett’s glowing description of “the tiny
scale of life” in preindustrial times was followed in 1973 by a vastly influential
prescription for the future based on the same conceit. In Small Is Beautiful, a
best-seller on both sides of the Atlantic, the British economist E. F. Schu-
macher called upon humankind to develop “technology with a human
face” that would aim to achieve “health, beauty and permanence” rather
than mere productivity. The goal of Schumacher’s self-proclaimed “Bud-
dhist economics” was “the maximum of well-being with the minimum of
consumption.” In introducing the U.S. edition of Small Is Beautiful to the
American audience, Theodore Roszak, who a few years earlier had helped
explain the 1960s counterculture to confused readers, lashed out at Schu-
macher’s ultimate target: the reigning “growthmania” that could rightfully
only be considered “childish nonsense” or “criminal prodigality.”4
Roszak’s part in introducing Small Is Beautiful to American readers
bespoke the powerful influences closer to home that were contributing to
the critique of growth. The 1960s counterculture, of which Roszak had been
both chronicler and champion, gave new life to the American antimaterialist
tradition and in so doing prepared the way for a positive reception of Schu-
macher’s ideas.5 The counterculture’s complaint against the established
134 > More
order was primarily psychological and moral: American capitalism, with its
fixation on material growth, left people neither happy nor fulfilled. Hippies
sought the sort of salvation not guaranteed by a rising GNP. As one coun-
terculturalist put it, the true hippie “sees a madness in the constant fight to
sell more washing machines, cars, toilet paper, girdles, and gadgets than the
other fellow.”6 Alienated from the culture of capitalism, yet deeply suspi-
cious of traditional political radicalism, members of the counterculture
sought fulfillment in personal reconstruction and, often, in the creation of
alternative communities of the like-minded, such as San Francisco’s Haight-
Ashbury, New York City’s East Village, or the host of rural communes that
flickered into life in the late 1960s and early 1970s. When Schumacher con-
cluded Small Is Beautiful by exhorting people everywhere to “work to put
our own inner house in order,” the prescription had a strong resonance for
an American audience already familiar with the counterculture’s often
inchoate but essentially similar urgings.7
The enthusiastic welcome afforded Schumacher when he visited the
United States on a speaking tour in 1977 reflected more than the influence of
the counterculture, however. Schumacher found himself invited to the
White House by a president who had actually read his book and lionized by
public figures ranging from Ralph Nader and Jerry Brown to Elliot Richard-
son and Gary Hart.8 Such attention resulted not simply from the rippling
influence of counterculture ideas but also from a broader alteration in
mainstream values that was the culmination of a deep-running trend in the
economy and society. As the 1960s ended, values were shifting away from
the work orientation, self-discipline, restraint, delayed gratification, and
respect for external authority and objective standards that together consti-
tuted a producer ethic, and were moving instead toward a new emphasis on
self-fulfillment. The change had been under way since the emergence of the
modern consumer economy and its accompanying therapeutic culture in
the early decades of the twentieth century, but now at the beginning of the
1970s the shift seemed to reach a peak. So large was the reorientation of val-
ues that we have not yet, a generation later, been able to describe it fully,
much less explain it or grapple with its implications.
Contemporary observers attempted to capture the reorientation with a
variety of labels. Ronald Inglehart wrote in the mid-1970s of the rise of a
“post-materialist” mind-set: “a shift from overwhelming emphasis on mater-
ial consumption and security toward greater concern with the quality of
life,” which he saw unfolding gradually but irresistibly throughout the indus-
trialized West. David Reisman observed that “post-industrial attitudes” were
The Retreat from Growth in the 1970s > 135
now “widely prevalent.” According to Daniel Bell, Western society was wit-
nessing “the end of the bourgeois idea.” One result of its demise, Bell wrote
in a brilliant social commentary, was a growing gulf between the techno-
economic order and the national culture—the former ruled by considera-
tions of efficiency, functional rationality, and the “organization of
production through the ordering of things, including men as things,” the lat-
ter increasingly opposed to the bourgeois values of an earlier age and dedi-
cated to the self as the measure of worth and touchstone of excellence.9
The shift in values may profitably be observed by comparing two of the
most celebrated analyses of postwar social science, one dating from the
1950s, the other from the 1980s; taken together, the two studies frame the
process of change, capturing it in mid-course if not quite explaining its
entirety. In 1950, David Reisman published The Lonely Crowd to immediate
and lasting acclaim. Reflecting the fear of mass culture and mass society and
the conformity they were thought to breed, Reisman examined the charac-
terlogical mechanisms that various types of societies throughout history
had developed to ensure conformity: premodern societies used shame to
create a tradition-directed social character or mode of conformity; indus-
trial societies such as nineteenth-century America used guilt to motivate an
inner-directed social character; and modern America had, by mid-century,
witnessed the emergence of an other-oriented mode of conformity based
on anxiety. While all three character formations had particular strengths
and virtues, all had, in Reisman’s analysis, deep flaws as well. Hope for the
future, he argued, lay in the emergence of yet another type of character ori-
entation: genuine autonomy. Only the autonomous, Reisman argued, were
“in their character capable of freedom.” But as of 1950, Reisman’s discus-
sion of autonomy was less descriptive of an existing reality than it was
hopeful “of finding ways in which a more autonomous type of social char-
acter might develop.”10
A scant generation later, in the mid-1980s, the sociologist Robert Bellah
and a team of coworkers reported that Reisman’s hope had in fact been
fulfilled, but with unhappy consequences. In Habits of the Heart: Individual-
ism and Commitment in American Life, Bellah reported that the central prob-
lem facing American culture had shifted dramatically since mid-century.
Americans were no longer endangered by the press of conformity, but
rather by an excess of “expressive individualism” that emphasized self-
expression to the detriment of communal concerns and responsibilities. 11
The danger of centripetal implosion had been replaced by the fear of cen-
trifugal atomization. The shift captured by these bookend masterworks
136 > More
seventies.”18 Thus, the celebration of the first Earth Day in April 1970
marked the coming of age of the new environmental movement rather
than its birth, a culmination rather than a beginning; the attention gener-
ated by the Earth Day festivities provided still more impetus, but to a move-
ment already enjoying remarkable momentum.
The impact of these developments on popular attitudes has been a mat-
ter of debate. Critics have cast the environmental movement as fundamen-
tally opposed to technology and have accused environmentalists of wanting
to replace modern science with their own “unregenerate obscurantism.”19
However, the historian Samuel P. Hays has argued that the environmental-
ists of the day constantly urged that science and technology be pushed
harder to develop solutions to existing problems that “the system” consid-
ered intractable or insolvable. In truth, both sides in the argument make
reasonable points. The attitudes of environmentalists toward science and
technology were complex and often ambivalent. Consequently, although
public opinion polls indicated a growing uneasiness about technological
development, notably among the young and those most concerned about
the environment, the wholesale repudiation of science and technology
feared by some critics of environmentalism never materialized.20
The environmental movement did, however, sanction a significant atti-
tudinal change of a related sort: dissent from growth was integral to the
ecological complaint, often implicitly so, sometimes explicitly. Some arrived
at the antigrowth conclusion circuitously. For example, Professor Barry
Commoner of Washington University in St. Louis, who was immortalized
on a 1970 Time cover as ecology’s Paul Revere, took pains in his influential
call to arms to distance himself from an attack on economic growth per se:
“What happens to the environment,” he wrote in his best-selling book The
Closing Circle, “depends on how the growth was achieved.” For Commoner,
the true villain was “environmentally intense technology.” But the distinc-
tion he drew so carefully seemed to blur when he sketched out “the eco-
nomic meaning of ecology”: under capitalism, he wrote, “pollution is an
unintended concomitant of the natural drive [emphasis added] of the eco-
nomic system to introduce new technologies that increase productivity.”
“There appears,” he concluded, “to be a basic conflict between pollution
control and what is often regarded as a fundamental requirement of the pri-
vate enterprise system—the continued maximization of productivity.”
Growth, it turned out, was the villain after all, at least under capitalism.21
Kenneth Boulding, an economist and a thoughtful environmental
spokesman, reached the same conclusion without Commoner’s obfuscation.
The Retreat from Growth in the 1970s > 139
The most direct attack on growth of the postwar period began in January
1972 with the publication in Britain’s Ecologist magazine of a lengthy state-
ment by thirty-three distinguished scientists and philosophers, including the
biologist Sir Julian Huxley, the geneticist C. H. Waddington, and the natural-
ist Peter Scott. They averred that unrestricted population and industrial
growth threatened to destroy “society and . . . the life support systems on
this planet, possibly by the end of this century and certainly within the life-
times of our children.” Only the achievement of a steady-state economy
could prevent “a succession of famines, epidemics, social crises, and wars.”23
Almost simultaneously, advanced word appeared in the U.S. press of a
new study entitled The Limits to Growth, produced by a team of researchers
from the Massachusetts Institute of Technology and sponsored by, as Time
put it in a burst of legitimacy-by-association hyperbole, “the . . . eminently
respectable members of the prestigious Club of Rome.”24 The Club of
Rome had been founded four years earlier by Aurelio Peccei, an Italian busi-
ness consultant who was a member of the management committee of Fiat
and former chief executive officer of the Olivetti Company. In 1972 its mem-
bers included approximately seventy eminent scientists, business executives,
educators, and technocrats from twenty-five nations. The Club consciously
excluded political officeholders from membership, the only exception being
140 > More
the U.S. senator Claiborne Pell, a Rhode Island Democrat. The group met
only irregularly (three times between 1968 and 1972) but funneled large
amounts of money from the Agnelli Foundation (Giovanni Agnelli was the
chairman of Fiat) and the Volkswagen Foundation into efforts to address
what Peccei called the “world problématique”—the complex of intermeshing
problems whose scale, scope, and intricacy spilled over national boundaries
and defied the normal channels and mechanisms of problem-solving. The
press of economic and population growth against a finite world constituted
the Club’s first point of attack.25
The Club’s examination of growth, labeled the Project on the Predicament
of Mankind, began in 1970. In meetings at Bern, Switzerland, and Cambridge,
Massachusetts, Jay Wright Forrester, formerly the director of MIT’s Digital
Computer Laboratory and at the time a professor of management at MIT’s
Sloan School, outlined a computer simulation model of the global system that
enabled researchers to study the interaction of several components of the
problématique. Most promising, Forrester’s “system dynamics” approach
seemed to offer the analytical rigor necessary to track interrelated variables
through time while taking into account delayed reactions and complicated
feedback loops among the various factors. Having sold the Club on his basic
technique, Forrester then turned over the tasks of tweaking and applying his
model to an MIT team of seventeen researchers from six nations, headed by
his twenty-eight-year-old protégé Dennis Meadows.
The MIT team ran computer simulations of the interaction of five vari-
ables: population growth, food supply, capital investment and industrial out-
put, nonrenewable resource depletion, and pollution. Using a variety of
scenarios based on differing assumptions, some more optimistic than oth-
ers, the exponential growth of population and capital/output repeatedly
ran into the limits imposed by either resource depletion or pollution, or
both. The most benign outcome was the catastrophic collapse of the world
system by the year 2100.26 Real-world resource and pollution problems, the
report suggested, could be kept manageable only if population growth and
capital investment/output were quickly stabilized and held steady. The
choice, to the extent that one existed, was between a self-imposed limita-
tion on growth or disaster.27
To drive home the need for swift action, the MIT team added to their
myriad charts and diagrams a telling discussion of the most striking charac-
teristic of the exponential pattern of growth exhibited by population and
industrial production: the suddenness with which it reaches an outer limit.
“Suppose,” they wrote,
The Retreat from Growth in the 1970s > 141
you own a pond on which a water lily is growing: The lily plant doubles in size each
day. If the lily were allowed to grow unchecked, it would completely cover the pond
in 30 days, choking off the other forms of life in the water. For a long time the lily
plant seems small, and so you decide not to worry about cutting it back until it cov-
ers half the pond. On what day will that be? On the twenty-ninth day, of course. You
have one day to save your pond.28
The message was clear: only prompt action could prevent catastrophe.
The actual publication of the MIT team’s report to the Club of Rome
was accompanied by a public relations blitz that would have made General
Motors proud. The U.S. publisher of the MIT/Club of Rome study
arranged to launch a popularly priced book version—without accompany-
ing technical apparatus—at a symposium sponsored by Washington’s pres-
tigious Woodrow Wilson Center for Scholars. A Washington public
relations firm, Calvin Kytle Associates, coordinated the release of publicity
and managed to excite great interest. The first copies of The Limits to Growth
hit the bookstands on the day that the Wilson Center symposium took
place in the imposing Great Hall of the Smithsonian Institution. The Club
of Rome’s handiwork quickly became the intellectual sensation of the sea-
son. And more: by the end of the 1970s, 4 million copies of The Limits to
Growth were in print in thirty languages. Peccei noted proudly that what
had originally been undertaken as “a commando operation” against “stag-
nant, wishful thinking” quickly resulted in “a new kind of discourse . . .
under way in practically every part of the world.”29
The critical response to The Limits to Growth proved less easy to manipu-
late than its initial publicity. The reviews were decidedly mixed. For some
admirers, the Club of Rome heralded “the demise of the Rostowian meta-
physic.” The computer’s logic seemed irrefutable. As an essayist for Time
observed, “Only a superoptimist would insist that growth could continue
forever; that would presuppose that resources are literally infinite.” Ken-
neth Boulding commented that anyone who believed that exponential
growth could go on forever in a finite world was either a madman or an
economist. The Club’s fundamental point impressed supporters as so self-
evident as to be truistic.30
Others doubted that a cliché could serve as a useful guide to action.
Were the outside limits near enough to justify the Copernican revolution in
thought and deed called for by the Club? In order to resolve that question,
commentators scrutinized the Club’s argument and found much to ques-
tion. The report’s data, methodology, analysis, and conclusions all drew
142 > More
fire, and the critics scored heavily on several counts.31 At the most concrete
level, did the report’s database constitute a sufficiently strong foundation for
such dire projections and sweeping prescriptions? Critics charged that the
very weakness of the report’s statistical base had in turn necessitated such a
high level of aggregation that plausible regional distinctions—as between
rich and poor, or developed and undeveloped areas—became impossible to
make. Other methodological sins further weakened the study. Skeptics
pounced with relish on the dangers of extrapolating current trends expo-
nentially into the future: such predictions in the 1870s, they noted gleefully,
would have predicted cities a century later buried under horse manure.
The most damning criticism zeroed in on the report’s analysis. The
economist Carl Kaysen pointed out the absence of any adjustment mecha-
nisms in the MIT model. The authors of The Limits to Growth provided little
hope for any mitigation or avoidance of the disasters they foresaw; the MIT
model allowed no role for human agency or technological innovation or
market mediation. “Prices play no significant role in the basic logical struc-
ture that supports the argument of ‘Limits,’” Kaysen complained,
“although it is precisely their function to make smooth transitions possible
as scarcities and demands change.”32
Particularly galling to critics was the fact that such analytical flaws
seemed to be obscured from public view by the technological romance and
putative rigor of the computer. “Computer fetishism,” sniffed the highly
regarded Science Policy Research Unit at the University of Sussex in a col-
lective critique. The old GIGO syndrome well known to the computer liter-
ate—”garbage in, garbage out”—had in the hands of the MIT team
become Malthus in, Malthus out, with the computer merely regurgitating
the flawed assumptions of its programmers.33 The Club of Rome report,
the economist Henry Wallach observed, had treated “a calculating
machine” as “an oracle” in order to hype its predetermined hypothesis.34
Moreover, critics contended, the use of computer modeling endowed
The Limits to Growth with “the surface appearance of scientific neutrality
and objectivity,” whereas in reality the MIT researchers conveyed a message
“which can only be fully understood in the context of their own beliefs, val-
ues, assumptions and goals.” To some that message reeked of technocracy,
a guiding principle of which held that dramatically simple (albeit elaborate)
technical answers can be found for the most daunting and complex of
human problems, even (or especially) if those problems have deep social,
political, and cultural roots. The authors of the Club of Rome report
seemed also to betray the vaguely authoritarian impatience with the tem-
The Retreat from Growth in the 1970s > 143
about it.”39 Even such a guru of growth liberalism as Walt Rostow agreed
that the Club of Rome report had had an important, positive impact,
despite its “technical inadequacies and the lack of data to fill the terms of its
equations.” He refused to join in criticism of The Limits to Growth because
he believed the study had contributed to the sort of “profound adjustments
in the way men and governments act and think” that were necessary in
order to “find the way to some more or less stable but dynamic equilibrium
between man and his physical environment.” After “two centuries of rela-
tively uninhibited expansion in population and production, with all of the
habits of mind and action that experience carried with it,” international
cooperation to reach such a dynamic equilibrium was imperative; the alter-
native, Rostow feared, might be yet another “grandiose cycle” that could
well “disintegrate the industrial civilizations we have built.”40
Thus, despite the assaults on The Limits to Growth by critics, the study’s
essential contention had a significant impact: there were limits and some
accommodation, however belated and grudging, had to be made to that
reality. It was a message that found a public already made receptive by the
counterculture’s highly visible rebellion against mainstream materialism, by
the less dramatic but perhaps more powerful influence of postmaterialist
values throughout Western industrial societies, and by the warnings of the
emergent environmental movement. The combined weight of these devel-
opments, together with adverse economic developments, policy errors, and
political misdeeds, doomed Nixon’s hopes for a geopolitical and moral cru-
sade based on the twin engines of economic growth and competition.
In early 1973, the president complained of “a certain tendency to
despair” and “doomsday mentality” that held continued economic growth
and environmental protection to be mutually exclusive. Reverting to lan-
guage that he used probably less because it persuaded others than because it
expressed his true Whiggish self, Nixon urged Americans to “convert the
so-called crisis of the environment into an opportunity for unprecedented
progress.” “Now,” he urged, “is the time to stop the handwringing and roll
up our sleeves and get on with the job.” But even Nixon retreated a bit. “I
believe,” he said, “there is always a sensible middle ground between the
Cassandras and the Pollyannas. We must take our stand upon that
ground.”41 He tried to articulate such a position in his commencement
address at Florida Technological University in June 1973. Nixon included in
his speech an unexceptional denunciation of “Malthusian pessimism about
the future,” but made a notable concession when he trotted out his rhetori-
cal chestnut about no nation being its true self unless engaged in a great
The Retreat from Growth in the 1970s > 145
enterprise. Building world peace, he told the graduates, was one such
endeavor; creating prosperity without the spur of war or the threat of infla-
tion was another. And, he continued, building a better environment was a
third. The addition of this new element to his by-now-familiar homily testi-
fied to Nixon’s recognition of a change in values that would influence pub-
lic discourse for the remainder of the 1970s.42
Where the main channel of that discourse would run was made clearer
by the publication of the Club of Rome’s often-overlooked follow-up study
to The Limits to Growth. In August 1974, the month of Nixon’s resignation
from office, Professors Mihajlo Mesarovic of Case Western Reserve Univer-
sity and Eduard Pestel of Germany’s Hannover University put the finishing
touches on Mankind at the Turning Point. This second Club of Rome study
trod familiar ground but took into account several of the most damaging
criticisms of its predecessor. Growth was still at the heart of the “probléma-
tique humaine,” but the danger was now specified much more carefully. A
disaggregated model of the world economy allowed for crucial regional dis-
tinctions to be made. Undifferentiated growth—”growth for growth’s sake
in the sense of ever increasing numbers and larger size”—was bad, but the
answer was not the stark and simple alternative of no growth. Humanity
needed, rather, to aim for “organic growth,” that is, balanced, differentiated
growth that would allow poor regions still to develop while causing the
growth of rich regions to taper off dramatically. Whereas a continuation of
undifferentiated growth guaranteed a doomsday scenario of inevitable, cat-
astrophic collapse, organic growth held out the possibility of an escape—
not from growth but rather through growth. Much of the discussion of
growth for the remainder of the 1970s would reflect a similar attempt to
subordinate and otherwise hedge growth without forgoing it completely.43
Haiku
The quality of life
Is a national goal,
But fifty-two points on the Dow Jones
Is a girl’s best friend.47
conference director. For five days at the end of January and beginning of
February 1978, five hundred official delegates and countless observers and
hangers-on descended on Washington to conduct what the press character-
ized as “the nation’s first town meeting on growth.”51
The conference organizers sought to update the nation’s postwar com-
mitment to growth and high employment for “the changed circumstances
and new realities of the 1970s and 1980s.” Much had indeed changed. There
were new constraints on growth in the form of resource shortages; new
doubts about the efficacy of macroeconomic policy to achieve satisfactory
growth; and new objectives—equality of opportunity, environmental pro-
tection, resource conservation, quality of life—added to the national
agenda, objectives “which must be integrated with and often balanced
against efforts to stimulate growth and employment.”52 But, the conference
organizers admitted, because the nation’s “social, economic, environmental
and physical aspirations may sometimes be in conflict,” balance often proved
difficult to achieve.53 As Commerce Secretary Juanita Kreps observed, “The
phrase ‘trade-offs’ has become part of every decisionmaker’s vocabulary.”54
In that likelihood of conflict lay the trap for policymakers. Balance sug-
gested harmony—until you asked people to define it. Economic growth
had hardly ended conflict in American life—witness the 1960s—but it had
enabled Americans to avoid some of the conflict over wealth, status, and
power likely in a highly individualistic, highly unequal society. To call for
balanced growth opened new realms to contestation; to balance competing
values and debate trade-offs threatened to reawaken and exacerbate confli-
cts that growth, for both better and worse, had allowed Americans for a
generation to avoid or mute.
“Within hours of the opening of the conference’s first sessions,”
reported Thomas Oliphant of the Boston Globe, “it was apparent that one
person’s balance is another’s cause for grief.”55 The White House Confer-
ence on Balanced Growth illuminated brightly what its chairman, Rocke-
feller of West Virginia, described as “the incredible array of tensions
involved with growth.”56 Predictably, there was conflict over competing
national priorities. The auto magnate Henry Ford II complained that “bal-
anced growth” was simply a euphemism for Luddite stagnation, a term
wielded by those who would sacrifice industrial progress on the altar of envi-
ronmental purity. Others talked of the tension between the goals of full
employment and price stability. A second kind of conflict focused on the
issue of equity, with balance in that case referring to how fully various
groups shared in the fruits of growth. For example, the National Conference
150 > More
of Puerto Rican Women informed conference director Koleda that its mem-
bership considered economic growth important but “would rather have
slower growth and insure participation of Hispanics in the economy.”57
A third kind of conflict was locational. By the mid-1970s, open warfare
had broken out between the champions of the still-dynamic Sunbelt and
the representatives of the becalmed Frostbelt (or Rustbelt; the label varied
but generally designated the Upper Midwest and Northeast, where so much
of America’s industrial development had occurred).58 Any meaningful con-
cept of balanced growth needed somehow to address the differing trajecto-
ries of these sections under the new regime of limits. Despite an attempt by
New York senator Daniel Patrick Moynihan and Georgia governor George
Busbee to lower the temperature of the regional debate, tensions between
northern and southern delegates to the conference remained palpable.59
Divisions among urban, suburban, and rural interests were perceptible as
well. Commerce Secretary Kreps had warned the delegates at the outset of
the conference against “the tyranny . . . of seeing ourselves as Easterners or
Westerners, whites or non-whites, environmentalists or developers.” “We
seem to have forgotten,” she lamented, “that we are all citizens of the same
country, that our lives are interdependent, more interdependent now than
ever before in history.”60 In a world of balance, trade-offs, and tough
choices, interdependence could be the stuff of division perhaps more easily
than the basis for cooperation.
The conference’s reviews varied wildly. A syndicated columnist for
Newsday called the meeting a “watershed event in American governance”
and likened it to the Constitutional Convention of 1787.61 Others differed.
When President Carter asked Tom Hayden, who had come as a delegate
from California, what he thought of the affair, Hayden asked, “Do you
want my frank opinion?” The president nodded. “The test of good govern-
ment,” opined the 1960s radical, “would be if you could abolish such con-
ferences.”62
Hayden’s comment could not have pleased Carter. Clearly, the confer-
ence had failed to create a national consensus on balance. The outcome was
all the more disappointing because the administration had organized the
conference with several objectives firmly in mind. First, it had wanted to
soften the conflict that the transition to an era of limits inevitably excited.
To that end, the conference organizers had officially titled the session on
regional relations “Beyond Sunbelt-Frostbelt,” hoping to encourage a posi-
tive discussion that would move beyond accusations of federal favoritism
toward one region or another. The conference succeeded in muting for the
The Retreat from Growth in the 1970s > 151
clearest and most important” message of the conference had been a general
agreement that the federal government needed to upgrade its capacity to
deal with growth and its consequences. The nation required a “national
growth policy process” to clarify national goals, identify trade-offs, and
resolve conflicts; and the president needed “a federal growth policy unit” to
advise him on growth-related issues.66 Clearly, this was not the sort of eva-
sive decentralization the administration had originally sought. Koleda
added to the confusion when, in reporting on the conference to outside
groups, he identified decentralized growth with a bygone era of plenty,
which was giving way, he claimed, to a new effort to conserve both energy
and infrastructure by “recentralizing” economic activity.67
In the end, the White House Conference on Balanced Growth and Eco-
nomic Development justified Tom Hayden’s cynicism. Little was achieved,
and even that was shrouded in ambiguity. The hope that such a national
town meeting on growth could breathe clear meaning into the concept of
balanced growth was dashed by the comment of Senator Randolph, the
progenitor of the event, in the conference’s final report: “We know in our
hearts what we mean by balanced growth.”68 Perhaps the only thing made
clear by the conference was the fact that nearly a decade of discussion about
balance had left the concept murkier than before.
beset by stagflation, the primary goals became damping inflation and cush-
ioning recession; the watchword in this new environment was not growth
but stability, especially price stability.
When Gerald Ford became president upon Nixon’s resignation from
office in early August 1974, he found the world economy in disarray. In late
July, the Organization for Economic Development (OECD) reported that the
industrialized West had suffered a deceleration of growth of record propor-
tions; shortly after Ford took the oath of office, the International Monetary
Fund reported that inflation was surging in economies all around the globe.
The combination proved disastrous. In the United States, wholesale prices
rose 3.7 percent in July and consumer prices 1.3 percent in August, both near
records. A Gallup poll reported in mid-July that Americans believed inflation
to be, far and away, the nation’s most important domestic problem. It sur-
prised few observers, then, when the new president used the occasion of his
first national address to rally his television and radio audience for a struggle
against inflation as “domestic public enemy number one.”69
Ford continued his emphasis on inflation long after it had become clear
to others that rapidly rising prices constituted only one part, although
admittedly an important one, of a larger problem facing the economy. At
congressional urging, the president convened a “domestic summit meet-
ing” in order to clarify the economic situation. A series of twelve mini-con-
ferences held around the country throughout the month of September
paved the way for a culminating two-day summit conference at the end of
the month. The first such mini-conference brought twenty-eight top acade-
mic and business economists to the East Room of the White House, where
the president called upon them to “draw up . . . a battle plan against a com-
mon enemy, inflation . . . our domestic enemy Number 1.” George Shultz,
only recently returned to private life after serving as Nixon’s secretary of
labor, director of the OMB, and secretary of the treasury, brought down the
house by observing, “Well, the economy is in terrible shape, and I wish you
guys in government would do something about it.” In summarizing the
economists’ deliberations for the president, Shultz maintained that the fore-
casts advanced by the various participants “were not all that different from
one another; you could throw your hat over all of them.”70 In reality, how-
ever, a significant division had developed.
Many of the economists gathered at the White House were beginning
to wonder whether inflation was indeed the number one enemy. Shultz
spoke for a numerical majority of those present who saw the problem as
more complicated than that: “We continue to identify the major risk as the
154 > More
risk of inflation,” he agreed, “but at the same time . . . there has been a
growing sense of a risk on the unemployment and recession side.” Two
notable dissenters spoke against any concessions to the fear of an economic
slowdown, however. John Kenneth Galbraith urged a thoroughly traditional
(almost Republican) approach: increase taxes and keep monetary policy
tight in order to stifle the inflation “which is, after all, the source of a great
deal of suffering at the present time.” “Let us not,” he pleaded, “be beguiled
by the fear of recession and have that fear keep us from attacking inflation.”
Milton Friedman, popularly viewed as Galbraith’s ideological archfoe,
expressed surprise at his agreement with his liberal adversary but echoed
Galbraith’s fundamental point: “The sooner we bite the bullet and take the
cure, the better.”71 Significantly, Ford heeded the minority view, partly
because it accorded with his own judgment and partly because the eco-
nomic situation was in flux and was therefore sufficiently ambiguous as to
discourage an abrupt, highly public, and politically embarrassing about-
face. Gerald Ford would not eat crow unless and until he absolutely had to.
Ford held fast to his war on inflation even as the economy eased slowly
into the most severe postwar recession yet. In late September, 800 invited
delegates and perhaps another 1,200 onlookers and newspeople jammed
into the International Ballroom of Washington’s Hilton Hotel amid the sort
of spectacle and media attention traditionally reserved for summit meet-
ings of the Cold War variety. The administration formally labeled the sum-
mit a “conference on inflation” and in his welcoming remarks Ford dwelled
again on the acute threat posed by inflation, but the economists in atten-
dance responded more forcefully than before that the economic prospect
was more complicated (and daunting) than the president allowed. “The
number one thing that is wrong about most discussions is the statement
that our number one problem is inflation,” Paul Samuelson observed point-
edly. The real problem, he maintained, was stagflation. The enemy, Walter
Heller explained, was the vicious combination of “stubborn inflation” and
“menacing recession” now confronting the nation. Once again, George
Shultz gave the judgment a bipartisan imprint: “I think it is pretty clear that
there is practically no dissent, that the reality . . . is stagflation . . . [and]
while inflation is public enemy number one, there are other problems to be
attended to as we attend . . . inflation.”72 But when Ford presented his eco-
nomic policy recommendations to Congress a week later, they reflected his
own preconceptions rather than the consensus of economists at the sum-
mit: a temporary tax surcharge, a ceiling on spending, and an ill-fated volun-
taristic campaign to Whip Inflation Now (WIN). As Senator Bob Dole
The Retreat from Growth in the 1970s > 155
observed, Ford was a less complicated political animal than Nixon: “Ford’s
objective was more simple. He aimed to be a good Republican president,
moving within the traditional Republican philosophy.” The struggle against
inflation, Ford commented in a 1978 interview, “provided the basic theme of
my administration.”73
The fear of inflation shaped policy even after the administration finally
admitted publicly that the economy had fallen into a serious recession. In
mid-December 1974, Ford told the Business Council what his audience
undoubtedly already knew: “We are in a recession. Production is declining,
and unemployment, unfortunately, is rising. We are also faced with contin-
ued high rates of inflation greater than can be tolerated over an extended
period of time.”74 With unemployment rising to 7.2 percent in December,
the GNP dropping 7.5 percent (in constant dollars) in the fourth quarter,
and inflation remaining distressingly high (in double digits for the year),
stagflation had indeed taken hold of the U.S. economy. The presumably
automatic trade-off between inflation and unemployment no longer
worked. “I have been a student of the business cycle for a long time,” Fed
chairman Arthur Burns told the Joint Economic Committee, “and I know of
no precedent for it in history.”75
The Federal Reserve and the administration tried to rachet down the
unemployment caused by the 1974–75 recession, but sought to do so gradu-
ally in order not to reignite the lingering inflation. Fed chairman Burns,
CEA chairman Alan Greenspan, and Ford remained fearful that overly
expansive antirecession measures would exacerbate the more deeply rooted
problem of inflation. “Recession is the number-one problem in the short
run,” Burns told a reporter, “but inflation is the number one in the longer
run.” As Greenspan later recalled, the administration sought “to simmer
down the deficit, the rate of inflation, and eventually get to a stable, bal-
anced economy. . . . I thought that if the short-term policy became expan-
sionary at this stage, it would prove eventually counterproductive.” A
gradualist approach to combating the recession left the administration open
to charges of hard-hearted inaction, but Ford believed that the long-run
economic risk of inflation justified his policy. “Unemployment is the biggest
concern of the 8.2 percent of American workers temporarily out of work,”
he admitted as the recession worsened in 1975, “but inflation is the universal
enemy of 100 percent of our people.”76
Under pressure, the administration did act to cushion the recessionary
blow, but always with an eye on long-term price stability. As unemployment
rose in 1975, Ford twice called for tax reductions (first in the form of tempo-
156 > More
I never in any serious way considered increasing spending in 1976. For one thing, I
was not sure that any great increase in spending would produce a significant reduc-
tion of unemployment. More important, I had concern that any wild increase in
spending, even if it won the election, would regenerate inflation, which would not
lead to a very happy outcome for the country. Basically, I believed that a balanced,
responsible economic policy would lead to success in the election. It almost worked.
Ford’s reticence was matched by Arthur Burns’s hesitancy at the Fed: the
charge that he had conspired to swing the 1972 election to Nixon by means
of a dangerously expansive monetary policy had stung Burns badly, and he
was determined to act cautiously in 1976. Ford and Burns acted both out of
principle and in the optimistic expectation that the economic recovery from
the 1974–75 recession already under way would continue unabated through
the election season. But in the summer of 1976 the economy faltered; Ford
promised another tax cut with sufficient spending cuts to leave the budget
in balance, but the time for effective stimulative action had passed. The
pause in the economic recovery was only temporary, but it helped swing a
close election to Jimmy Carter.77
Carter came to the presidency on the wings of a Kennedyesque promise
to recapture the economic momentum of the 1960s. In his first head-to-
head debate with President Ford, the former Georgia governor savaged the
administration for accepting sub-par economic performance; establishing a
vivid contrast between himself and the incumbent, Carter emphasized the
need to reduce unemployment and minimized the danger of inflation in an
economy utilizing less than 75 percent of its existing productive capacity. “A
growth in our national economy equal to what was experienced under
Kennedy, Johnson, before the Vietnam War”—5 to 5.5 percent—would,
Carter promised, make it possible by 1981 to achieve full employment,
The Retreat from Growth in the 1970s > 157
reduce inflation, and produce both a balanced budget and a $60 billion sur-
plus that could be used to fund “the programs that I promised the American
people.”78 Carter’s faith in growth and playing down of inflation during the
campaign reflected the influence of his early advisers, who were, in the
words of one economic historian, “the old gang” of Keynesians who had
clustered around JFK and LBJ.79
Once in office, the Georgian followed through on his early commit-
ments by quickly presenting an economic stimulus package to Congress.
“We are,” he declared, “in the middle of the worst economic slowdown of
the last 40 years.” To attack the problem, he proposed a $31 billion (over two
years) program of $50 per capita tax rebates, a small permanent business tax
reduction, increased public works spending, and an expansion of public ser-
vice employment.80 For a fleeting moment, it appeared to many liberal
Democrats that their hope for a revival of 1960s-style growth liberalism was
about to be fulfilled.
Carter was not that kind of liberal, however, and the economic circum-
stances he confronted in the mid-1970s were quite different from those faced
by the policymakers of the New Frontier and Great Society. Carter was
what Robert Kuttner has called a minimalist liberal. The anonymous Wash-
ington insider who quipped, “I don’t know if he’s Franklin Roosevelt or
Richard Nixon,” perhaps overstated, but he spoke for many who discovered
that Carter’s politics defied easy categorization. With time, it became clear
that Carter’s social and racial liberalism was closely balanced by a deep fiscal
conservatism and an abiding concern for managerial efficiency. The ideo-
logical mix was sufficiently removed from the New Deal tradition to cause
Carter’s chief domestic adviser, Stuart Eizenstat, to characterize his boss as
“the first neoliberal Democratic president, fiscally moderate, socially pro-
gressive, and liberal on foreign policy issues.”81
Among the qualities that distinguished Carter from his immediate Demo-
cratic predecessors was his appreciation that the United States had indeed left
behind the exuberant growth of the immediate postwar years and entered a
new season of limits. One reason for this different perspective was the
mounting evidence pointing to such a conclusion that had become available
in the 1970s. A second reason was the fact that what the historian Leo Ribuffo
has called Carter’s “visceral puritanism” predisposed the Georgian to focus
on the proof and implications of decline. Nixon before him had perceived the
existence of limits, but thought that creative leadership could salvage U.S. pre-
eminence; Carter, on the other hand, believed that such limits constituted a
new reality that could be accommodated but not transcended.
158 > More
“Dealing with limits,” Carter recalled after leaving office, had been “the
subliminal theme” of his presidency. He warned Americans in his inaugural
address that “more is not necessarily better, . . . even our great nation has its
recognized limits, and . . . we can neither answer all questions nor solve all
problems. We cannot afford to do everything.” And he reiterated that
theme toward the end, speaking at the dedication of the John F. Kennedy
Presidential Library in Boston in late 1979:
President Kennedy was right: Change is the law of life. The world of 1980 is as differ-
ent from what it was in 1960 as the world of 1960 was from that of 1940. . . . After a
decade of high inflation and growing oil imports, our economic cup no longer
overflows. . . . We can no longer rely on a rising economic tide to lift the boats of the
poorest in our society. . . . We have a keener appreciation of limits now—the limits
of government, limits on the use of military power abroad; the limits on manipulat-
ing, without harm to ourselves, a delicate and a balanced natural environment. We
are struggling with a profound transition from a time of abundance to a time of
growing scarcity in energy.82
restricted budgets, and lower deficits.” “One failure could cause the downfall
of this administration,” he told a cabinet member at midterm, “Inflation.
Almost everything is subservient to it in political terms.”85
Carter’s nomination of Paul Volcker to the chairmanship of the Federal
Reserve in 1979 demonstrated how far his commitment to restraint would
carry. Volcker promptly led the Fed into a vigorous anti-inflation campaign
that relied on the management of the money supply rather than the less
aggressive manipulation of interest rates. Now determined by economic
conditions, interest rates soon shot through the roof and helped slow the
economy into an election-year slump. In March 1980, Carter made his own
contribution to the slowdown by presenting a balanced budget for fiscal
year 1982 and threatening to veto any bills that endangered that goal. At the
same time, he requested the Fed to impose selective restraints on consumer
credit, causing consumer spending to collapse with unforeseen speed and
disastrous consequences.86
Carter’s desperate mix of halfhearted attempts at economic expansion to
deal with the pain of unemployment and the threat of recession, alternating
with determined attempts at retrenchment to attack the omnipresent danger
of inflation, ultimately failed on both counts. To be sure, Carter had inher-
ited a set of intertwined problems that seemed nearly intractable, and they
worsened over time. The decline in productivity continued, and the stop-
page of Iranian oil production because of revolutionary turmoil touched off
yet another round of OPEC price hikes that nearly tripled the price of oil
between 1979 and 1981. By 1980, the economy was in a recession, with unem-
ployment rising to 7.8 percent; inflation raged out of control, as consumer
prices skyrocketed (at an annualized rate of 15.9 percent in March); and inter-
est rates reached postwar highs, as the federal funds rate (which governs
interbank borrowing of reserve funds) jumped to 19.4 percent by the end of
March and the prime rate reached 18.5 percent a month later. The stagflation
that had gripped the U.S. economy at mid-decade seemed now, four years
later, all the stronger and more debilitating.87
As the presidential election of 1980 loomed, Carter came under increas-
ing pressure to pump up the economy in answer to Reagan’s rousing call for
massive tax cuts to “stimulate . . . [the] economy, increase productivity, and
put America back to work.”88 On the president’s left flank, organized labor
and the forces aligned with Massachusetts senator Ted Kennedy called for
an all-out fiscal and monetary attack on unemployment and economic
slack. During the 1980 campaign, Carter’s own advisers, the president noted
in his diary, were “unanimous in asking me to approve a tax reduction and a
160 > More
the call for wage and price controls, but his forces prevailed on the other eco-
nomic proposals. Carter refused to endorse the remaining planks but agreed
to support their intent. “It is hard to think of another recent occasion,”
Eizenstat later commented bitterly, “on which a major political party so
explicitly acted in ways contrary to common sense, good economics, and the
national mood. The convention portrayed a party that had lost touch with
economic and political reality.” “It was clear to me then,” he recalled, “that
the party was over, both literally and figuratively.”99
The Democrats found themselves immobilized as the 1970s ended. The
tattered remnants of growth liberalism had appeal but little relevance in a
time of limits; the struggle against inflation required a regimen of restraint,
sacrifice, and pain that a party coalition nurtured on economic growth and
programmatic largess appeared incapable of providing. The gap between
the allure of expansive government activism and the reality of fiscal respon-
sibility constituted, according to the historian Steven Gillon, “the central
problem facing the modern Democratic party.” In October 1980, Vice Presi-
dent Walter Mondale called upon progressives to “adjust the liberal values
of social justice and compassion to a new age of limited resources.”100 The
failure of the Democrats to achieve such a redefinition in the 1970s left the
party adrift without a compelling guiding theme.
The Democrats were not the only ones confounded by the many-sided
retreat from growth in the 1970s. A decade of challenges to growth, both
rhetorical and real, left Americans of all political stripes disconcerted. In the
late 1970s Daniel Yankelovich and Bernard Lefkowitz examined the existing
polling data and found Americans “midway between an older post–World
War II attitude of expanding horizons, a growing psychology of entitle-
ment, unfettered optimism, and unqualified confidence in technology and
economic growth, and a present state of mind of lowering expectations,
apprehensions about the future, mistrust in institutions, and a growing psy-
chology of limits.” Researchers at the University of Michigan’s Survey
Research Center agreed that “the certainty and assurance which prevailed
in the early postwar years has given way in the 1970s to public disorientation
and confusion.”101
Attitudes toward growth manifested a distinctly schizoid quality. On the
one side, the Harris Survey reported “a deep skepticism about the nation’s
The Retreat from Growth in the 1970s > 163
capacity for unlimited economic growth . . . [and] the benefits that growth
is supposed to bring.” Such views, Louis Harris concluded, “suggest that a
quiet revolution might be taking place in our national values and aspira-
tions.”102 But even while this skepticism was intensifying, Americans were
also answering pollsters’ questions in a way that bespoke a rising sense of
material entitlement. Throughout the mid-1970s, the number of people
agreeing that “it is permissible to buy the things I want when I want them”
increased year by year.103 While presiding over the White House Confer-
ence on Balanced Growth, West Virginia governor John D. Rockefeller IV
complained that Americans evinced little inclination “to conserve or to
change their lifestyles or to even dream about that particularly. . . . In fact,
the ethic of ‘more’ seems very much to be our national standard.”104
Carter’s final attempt to set forth a national agenda reinforced the
ambivalence about growth rather than dispelling or resolving it. Soon after
his malaise speech of July 1979, the president brought Hedley Donovan, the
former editor of Time, into the administration and asked him to set up a
commission to examine the long-range direction of the country. “Some-
thing has changed in the national spirit,” Donovan told the White House
senior staff. “America is not itself when it lacks faith in the future and . . . a
vision of the future.” Donovan’s proposed President’s Commission on a
National Agenda for the Eighties would provide such a vision by addressing
“the present national mood and . . . the very broad question of how some
sense of common purpose and optimism might be resolved.”105
At Donovan’s urging, William J. McGill, the president of Columbia Uni-
versity, took over as the commission’s chairman and set about to model the
enterprise after President Dwight D. Eisenhower’s 1960 Commission on
National Goals. After 15 months, McGill and his 45 commissioners had
expended $2.8 million, invested over 5,000 hours of work, and produced a
total of 1,236 pages of published findings and recommendations—but the
result differed fundamentally from the Eisenhower model.106 As McGill and
his colleagues noted in the opening passages of their final report, America
had “changed significantly in the past two decades.” The optimistic mood of
the 1960s—”the generally accepted view . . . that there were no inherent
limitations”—was gone, likely forever. “A new constellation of factors” now
required the United States “to make some fundamental choices.” The real-
ity of limits required “that we set priorities, that we choose among many
good and decent ends.” And merely choosing did not guarantee success:
“Whatever decisions are made,” the commissioners concluded, “we as a
nation shall not painlessly achieve most of the larger goals, nor easily solve
164 > More
rest of his presidency, in the aftermath of Watergate and the onset of stagfla-
tion, other political leaders, unwilling to participate in the retreat from
growth under way in the broad culture, cast about for ways to recapture the
economic vigor of the early, halcyon postwar years. The ensuing search
continued from Nixon’s final days until the end of the decade and generated
three major approaches. From the left side of the political spectrum came a
proposal for a demand-side fiscal Keynesianism that hearkened back to the
call for full employment at the end of World War II and to the growth eco-
nomics of Leon Keyserling. Others, again chiefly liberals, took a different
tack, proposing to recapture economic momentum by means of microeco-
nomic intervention and guidance at the level of particular business sectors
and individual firms: so-called industrial policy. Meanwhile, on a third front,
conservatives suggested a dramatic departure from standard Keynesian
demand-side macroeconomic analysis, recasting their traditional preference
for reduced taxes and small government in the form of a new growth-ori-
ented economic analysis and policy that focused on the preeminent contri-
bution of the supply side to the task of increasing economic well-being.
Over the course of the 1970s, the struggle among these competing prescrip-
tions for growth yielded no clear winner, but in the long run it prepared the
way for the conservative reorientation of the U.S. political economy that
distinguished the 1980s.
In June 1974, Representative Augustus F. Hawkins, a Democrat from the
congressional district around the Watts area of Los Angeles, and Represen-
tative Henry S. Reuss, a Wisconsin Democrat, introduced the Equal Oppor-
tunity and Full Employment Bill. Hawkins characterized the bill as an
attempt to “return to the original intent of the Murray-Wagner full
employment bill as introduced in 1945.” Two months later, Senator Hubert
H. Humphrey introduced a counterpart version in the Senate. Commonly
called Humphrey-Hawkins, the proposed legislation was, as the historian
Wyatt C. Wells has put it, “essentially a plan to expand demand as fast as
possible.”1 The New Republic observed that “the only ironclad rule” in
Humphrey-Hawkins was “that from now on every administration should
be required to foster growth in the economy.” Although the journal charac-
terized Keyserling as “the father” of Humphrey-Hawkins, he had no hand
in the original drafting of the legislation. However, he played a prominent
role as Hawkins’s representative when the bill was subsequently redrafted
on its way to ultimate passage (working with Jerry Jasinowski from the staff
of the Joint Economic Committee, three AFL-CIO representatives, and the
principals themselves); he also testified in support of the bill on numerous
168 > More
occasions and fought energetically both privately and publicly to secure its
approval. In the end, Keyserling could claim at least indirect intellectual
paternity, because the bill embodied his demand-side, spending approach
and his strong pro-growth orientation.2
Over the next several years, Humphrey-Hawkins stayed at the top of the
liberals’ legislative agenda. Civil rights groups and organized labor gave the
bill vigorous support. Along the way to its final passage in 1978, Humphrey-
Hawkins underwent considerable revision, but its fundamentals remained
essentially the following: the bill recognized employment at a “decent”
wage as a personal right and committed the federal government to a
numerical, long-term full-employment goal; in order to achieve that goal, it
called for an annual presidential Full Employment and Balanced Growth
Plan to coordinate long-range fiscal and monetary policy; and it established
that, in the event the private sector could not fulfill the bill’s pledge of full
employment, the federal government would operate as the employer of last
resort and provide public service jobs for all able and willing adults.3
Two central premises underlay the particular provisions of Humphrey-
Hawkins, and both reflected Leon Keyserling’s influence. The first assump-
tion was that the problem of stagflation in the 1970s was more a problem of
stagnation than of inflation and that it needed to be addressed chiefly as a
failure of demand. In Keyserling’s estimation, slow growth and consequent
economic stagnation resulted primarily from the inadequacy of demand
brought on by a maldistribution of income. Historically, he told his fellow
Democrats in 1974, productive capacity had been allowed to grow signifi-
cantly faster than demand: “When this has resulted in blatant overcapac-
ity,’” he argued, “the sharp cutbacks in business investment plus the
enduring and larger deficiencies in ultimate demand have brought on stag-
nation and then recession.”4 The surest remedy was to strive for full
employment as a way of improving income distribution and ensuring ade-
quate demand. “More rapid expansion of private consumption and
increased public outlays” would position the economy “for vigorous move-
ment toward reasonably full resource use.”5
The second key assumption underlying Humphrey-Hawkins was the
belief that such action to bolster demand could be undertaken with little
concern for inflationary dangers. Keyserling believed that the so-called
Phillips curve, which proposed a trade-off between employment and infla-
tion (when one went up, the theory had it, the other went down), was an
“utter fallacy.” In his view, it was the suppression of real economic growth
and the acceptance of excess unemployment, often in the mistaken effort to
The Reagan Revolution and Antistatist Growthmanship > 169
attain price stability, rather than any boosting of demand by the federal gov-
ernment, that constituted the most serious source of inflationary pressure.
A “stunted and repressed economy” caused a “tremendous decline in the
rate of productivity gains,” and this in turn resulted in higher per unit labor
costs and inevitable price increases.6
The opponents of Humphrey-Hawkins attacked both of these assump-
tions. Some disputed the analysis that fixed on demand as the crucial factor.
In time, their line of criticism would contribute to the emergence of a new
supply-side economics, a topic discussed at length below. A much broader
array of critics expressed concern over the inflationary danger in the
Humphrey-Hawkins approach. The opposition from conservative econo-
mists was somewhat predictable. Milton Friedman characterized the bill as
“close to a fraud” and warned that it would “very likely ignit[e] . . . a new
inflationary binge.”7 More damaging was the criticism of influential
Democrats, including John Kenneth Galbraith, Arthur Okun, Alice Rivlin
(director of the Congressional Budget Office), Paul Samuelson, and George
Schultze. Schultze, who had served in the Bureau of the Budget under John-
son and would become chairman of the CEA under Jimmy Carter, was a
particularly effective critic precisely because he seemed to eschew ideologi-
cal posturing. “Every time we push the rate of unemployment toward
acceptably low levels, by whatever means,” he warned, “we set off a new
inflation. And in turn, both the political and economic consequences of
inflation make it impossible to achieve full employment or, once having
achieved it, to keep the economy there.”8 The nonpartisan Congressional
Research Service of the Library of Congress concluded similarly that
Humphrey-Hawkins would “greatly accelerate the inflationary spiral.”9
The supporters of Humphrey-Hawkins, on the other hand, believed that
the dangers of inaction were themselves considerable, justifying strong
action and the taking of some risks. Speaker of the House Carl Albert (D.,
Okla.) warned that extended joblessness was creating “a sizable segment of
our population in danger of developing an alienated way of life, of becom-
ing a class apart, separated from the mainstream of our society and main-
tained by an inequitable and inadequate welfare system.”10 To Keyserling,
the challenge was moral as much as it was technical. “The whole problem in
the United States,” he asserted in 1975, “isn’t economic at all, it’s moral. . . .
We don’t sufficiently recognize our moral obligation toward unemployed
people . . . or toward the poor.” Americans, he claimed, had “the capacity
within 10 years to remove the conventional economic problems, and devote
ourselves entirely to the higher purposes of life.”11 To the critics of
170 > More
“utterly impossible to reach the mid-1983 goals.”13 From the vantage point
of the mid-1980s, Keyserling complained bitterly but correctly, “Since 1978,
neither the President nor the Congress has paid any significant attention to
the large purposes of the . . . Act.”14
In the end, the recycling of demand-side, Keynesian growth economics
proved an expensive and chimerical episode for Democrats. They expended
much political energy and capital to pass a law that in retrospect yielded only
relatively minor procedural advances—the requirement of specific numeri-
cal targets and the requirement of regular explanations by the Federal
Reserve concerning the relationship among its monetary policies, the presi-
dent’s targets, and the Humphrey-Hawkins goals. By any calculus, the cost
was exorbitant. The actions of the Carter administration in avowing support
for Humphrey-Hawkins, so long as its most egregious flaws were remedied,
and then abandoning its larger purposes in the wholly defensible (but also
wholly predictable) struggle against inflation smacked of disingenuous
betrayal and helped complete a break between Carter and the Democratic
left wing that neither could afford. To the administration, the supporters of
Humphrey-Hawkins appeared to be woolly-headed idealists out of touch
with the more intractable aspects of economic reality; in the eyes of the Left,
Carter and his advisers stood convicted of hard-hearted perfidy.
An alternative to the traditional demand-management Keynesianism of
Humphrey-Hawkins appeared simultaneously, although it would later come
to be remembered more as an artifact of the 1980s: industrial policy.
Whereas fiscal and monetary policies are generally macroeconomic,
intended to affect broadly the entire economy, industrial policy is microeco-
nomic, designed to influence behavior in particular sectors. The purpose is
usually to cushion the decline of older industries or to encourage the rise of
new technologies. Industrial policy took hold after World War II in both
Europe and Japan, and seemed to many observers to account significantly
for the competitive vigor of those economies in the 1970s. As the American
economic system faltered, some liberal advocates of government planning
borrowed inspiration from the “indicative planning” of the Europeans and
the institutional wizardry of the Japanese Ministry of International Trade
and Industry (MITI) and sought to duplicate their feats in the U.S. econ-
omy.15
One of the earliest forays into the realm of industrial policy began some-
what accidentally during the closing days of the Nixon presidency, when the
beleaguered administration in 1974 created the National Commission on
Supplies and Shortages, which was intended to provide guidance for dealing
172 > More
with the energy crunch touched off by the Arab oil embargo. Nixon stacked
the group with conservatives in order to produce a moderate outcome; but
Senator Hubert Humphrey later added to the commission a small unit that
labored under the unwieldy title of Advisory Committee on National
Growth Policy Processes, and this latter group pushed beyond Nixon’s orig-
inal intentions to help pioneer the idea of an American industrial policy.
The initial formulation of industrial policy reflected the deepening eco-
nomic pessimism of the day. The Advisory Committee on National Growth
Policy Processes reported that the historical “frontier society” had come to
an end and that a new “American approach to planning” was needed to guide
the nation “from a world view of limitless resources and opportunities to
one in which both are limited.” The “new phase of industrial and societal
development” required Americans to “conserve, husband our resources,
define more sharply our objectives at home, [and] use our strength more
selectively abroad.” Only planning, down to the level of regions and sectors,
could achieve these ends. Among its recommendations, the committee
called for the creation of a center for statistical policy and analysis to gather
data for use by, among others, a new “sectoral economic staff” in the Execu-
tive Office of the President, which would “follow and analyze key sectors of
the private economy on the President’s behalf.” In the end, the committee’s
report had little practical impact. Indeed, a close reading of the reservations
expressed by the individual committee members in the report’s codicil
makes it clear just how controversial any proposal for the extension of gov-
ernment planning down to the microeconomic level of sectors and firms
was. Nevertheless, from these beginnings emerged a discussion that would
continue into the 1990s.16
Jimmy Carter moved surprisingly far in the direction of industrial policy,
at first haltingly, through inadvertence, and later by design. The administra-
tion found itself initially driven to sectoral interventions by the travail of sick
industries. In an effort to help a steel industry reeling under the onslaught of
international competition, Carter in 1977 implemented the so-called
Solomon plan (named for the under secretary of the treasury, Anthony M.
Solomon, who oversaw its development), which put a price floor under for-
eign-made steel and called for a tripartite committee to advise on industry
modernization. Similarly, when the federal government came to the aid of
the ailing Chrysler Corporation in 1979, it coupled a massive infusion of
fresh money with ongoing, and initially intrusive, government oversight of
the auto manufacturer’s performance. Meanwhile, Carter’s program of par-
tial deregulation of airlines, gas and oil prices, electric power generation,
The Reagan Revolution and Antistatist Growthmanship > 173
more guarded and less emphatic. Alan Greenspan, Paul McCracken, and
Herbert Stein—all former economic advisers to Republican presidents
Nixon and Ford—supported the bill, but they characterized as speculative
and extravagant the contention of some supporters that the energizing
effects of the cuts would quickly offset the immediate revenue losses from
cutting the income tax by a third over three years. Nevertheless, all believed
that Kemp-Roth offered the best available vehicle for reining in government
expenditures. As McCracken expressed it: “The primary case for Kemp-Roth
is a growing conviction that Government has been allocating too much of
the national income to itself, and that the time has come to change this.”31
Making the same argument in his regular Newsweek column, Milton Fried-
man wrote that “the only effective way to restrain government spending is
by limiting government’s explicit tax revenue—just as a limited income is
the only effective restraint on any individual’s or family’s spending.”32
Clearly, these supporters valued what Kemp-Roth would do to the size of
the public sector at the federal level as much as its vaunted ability to generate
a dramatic growth spurt through heightened incentives to produce.
While the experts debated, Kemp-Roth struck a resonant chord with the
general public. A 1978 Roper poll reported that the public supported a 30
percent tax cut by a two-to-one margin. The popular mood had finally
caught up with Kemp. Antitax sentiment swelled as inflation relentlessly
drove people into higher and higher tax-rate brackets without really having
made them richer—the dreaded phenomenon known as “bracket creep.” In
some locales, inflation helped produce a real estate boom that brought large
increases in real estate values and hence property taxes at a time when
incomes were stagnating. The most dramatic manifestation of antitax senti-
ment came in the great California tax revolt of 1978, when voters handily
approved Proposition 13, which capped the maximum rate of property taxa-
tion and prohibited the state and the local California governments from
raising existing taxes or imposing new ones without a two-thirds majority
vote in the affected jurisdiction. The cut in property taxes put additional
money in people’s pockets, but did so without altering the incentive to save
and invest more, which was the most distinctive feature and the raison d’
être of the new supply-side emphasis. Nevertheless, Kemp characterized
the California initiative as sounding “a coast-to-coast appeal for a solution to
oppressive tax rates,” and his staff economist later wrote that Kemp-Roth
“got a big boost” from the way that the debate over Prop 13 influenced the
general political and economic climate.33 A less noticed but equally signifi-
cant straw in the wind was the passage in the fall of 1978 of a capital gains
The Reagan Revolution and Antistatist Growthmanship > 179
tax cut that effectively reduced the maximum tax rate on capital gains from
roughly 49 to 28 percent. The capital gains cut was enacted by strong bipar-
tisan majorities in both houses despite the opposition of the Carter adminis-
tration, whose spokesmen reviled the proposal as the “Millionaire’s Relief
Act of 1978.”34
Despite such favorable developments, at decade’s end Kemp-Roth
remained stuck in the legislative mill. Republicans had rallied to the cause
but could not pass their program. On the several occasions when they man-
aged to bring their handiwork to a vote, Kemp-Roth was defeated. But in
another sense, Kemp and his allies had succeeded wildly in seizing control
of the debate about the future shape of the economy and direction of pol-
icy. While Humphrey-Hawkins slipped quietly into the oblivion of studied
inaction and outright evasion and while industrial policy remained the stuff
of academic debate rather than the guiding principle of public policy, the
Kemp-Roth tax cut proposal became an important vehicle for the funda-
mental reconsideration of the Keynesian demand-side analysis and prescrip-
tion that had dominated national economic policy since the end of World
War II. As the 1970s came to an end, the casting about for an alternative path
to growth narrowed down to the promise of a supply-side revolution.
ing.”42 With less sadness, Robert Lucas wrote in 1981 that Keynesianism was
“in deep trouble, the deepest kind of trouble in which an applied body of
theory can find itself: It appears to be giving wrong answers to the most
basic questions of macroeconomic policy.”43 Pragmatists and policymakers
in the middle, who gave allegiance wholly to neither Keynes nor his acade-
mic detractors, found themselves adrift on the currents of academic debate
and real-world ineffectiveness. As Paul Volcker explained to a journalist,
“We’re all Keynesians now—in terms of the way we look at things.
National income statistics are a Keynesian view of the world, and the lan-
guage of economists tends to be Keynesian. But if you mean by Keynesian
that we’ve got to pump up the economy, that all these relationships are
pretty clear and simple, that this gives us a tool for eternal prosperity if we
do it right, that’s all bullshit.”44
The weakening of the Keynesian consensus in both macroeconomics
(because of intellectual challenges) and policy (because of the practical fail-
ure to deal effectively with stagflation) opened the way for the emergence
of a new, competing approach to economic problems that would subordi-
nate the Keynesian emphasis on the management of demand to a renewed
attention to the problems of supply. The resultant “supply-side economics”
was a complex mixture of intellectual insights from within the economic
mainstream—often rediscovered ideas from the pre-Keynesian past—and
prescriptions from the more highly and overtly politicized worlds of public
policy and advocacy journalism.
Whereas the attacks on the existing Keynesian consensus had taken
place within the economics discipline’s traditional channels of profession-
ally scrutinized theoretical disputation—in refereed journals and the like—
the framing of the supply-side alternative occurred more in the rough-
and-tumble of policy debate and was, therefore, a more haphazard and
inchoate process. As late as 1981, one supply-sider has noted, “there were no
distinctive supply-side texts, no courses, no distinguished scholar, and no
school of supply-side economists.”45 Nevertheless, the formulation of sup-
ply-side economics has not lacked for chroniclers, and the recollections of
the participants enable us to chart the development of the doctrine with
some precision and confidence.
Just what constituted the essence of the supply-side approach that took
shape as the Keynesian approach went into decline has been a matter of dis-
pute. The champions of the new school have complained bitterly about
being misquoted and mischaracterized. Notwithstanding such controversy,
the basic outlines of their position are clear. First, they emphasized that sup-
The Reagan Revolution and Antistatist Growthmanship > 183
ply matters greatly, an economic truism that had, in fact, been lost sight of
since the triumph of Keynes, in the aftermath of which the chief economic
problem had seemed to be the maintenance of sufficiently high aggregate
demand to keep pace with the economy’s recurrent tendency toward over-
production. Supply-siders shifted attention back to the problem of produc-
tivity and how to raise it. Second, in achieving this rediscovery of the relative
significance of supply, the supply-siders also necessarily shifted attention
away from macroeconomics, with its concern for aggregate behavior, and
back to the behavior of discrete economic actors—individuals and firms.
Third, following the logic of their broad suppositions, the supply-siders
believed that the way to achieve prosperity without inflation was to expand
supply by increasing the incentives for individuals to work, save, and invest:
the surest way to achieve such results was to cut taxes, especially the existing
high marginal rates—those tax rates that applied to the last dollar of income
and that therefore most discouraged extra effort and enterprise. Such a tax
reduction, they claimed, would raise real output—not by increasing demand
but by operating on the supply side of the economy. Full-bore supply-siders
went so far as to assert that such tax cuts would be so powerful as to actually
generate more revenue than would be lost by the cuts themselves.46
The theoretical base for these supply-side ideas derived partly from the
classical economics of the nineteenth century and partly from more recent
developments at the margin of economic discourse in the early 1970s. At
one level, the intellectual founders of the supply-side movement considered
that they had chiefly “discovered a lost continent of [pre-Keynesian] eco-
nomics.” The foundation of the supply-side approach derived from the
insights of Adam Smith, Jean-Baptiste Say, and Alfred Marshall. The point of
good economics and good government, Say had asserted early in the nine-
teenth century, was to stimulate production, not consumption. Supply-
siders asserted that the enduring wisdom of Say’s insight had been obscured
by the wrenching experience of the Great Depression and the subsequent
sway enjoyed by Keynes’s emphasis on the necessity of maintaining aggre-
gate demand. The “new” supply-side economics, wrote insider Norman
Ture, was “merely the application of price theory—widely and tastelessly
labeled microeconomics—in analysis of problems concerning economic
aggregates—widely and tastelessly labeled as macroeconomics. . . . Its new-
ness is to be found only in its applications to the public economic policy
issues of contemporary American society.”47 Supply-side theory, the econo-
mist Arthur Laffer agreed, was “little more than a new label for standard
neoclassical economics.”48
184 > More
geoning movement’s most complete manifesto in 1978, a book that he, with
characteristic zeal, entitled The Way the World Works. The basic economic
prescription formulated at Michael I and subsequently publicized in these
neo-conservative forums was tight money to curb inflation and supply-side
(i.e., incentive-creating) tax cuts for economic growth.
Meanwhile, the same supply-side approach to fiscal policy emerged
independently in a very practical way on Capitol Hill (as we have seen in
our discussion of Kemp-Roth in the previous section), where the staff econ-
omists Paul Craig Roberts and Bruce R. Bartlett worked with Representa-
tive Jack Kemp (and, later, other Republicans) to develop the supply-side
ideas that eventuated in Kemp-Roth. Kemp proved to be the linchpin that
joined the several wings of the supply-side crusade together. In 1975, Bartley
met Kemp in Washington and upon his return to New York, told his Wall
Street Journal colleague Wanniski, “You’d better get by and meet this guy
Kemp; he’s quite a piece of horseflesh.” Wanniski sought out the young
congressman and in short order introduced him to Laffer and Kristol. By
mid-1976, the Wall Street Journal had begun to champion Kemp as the chief
political spokesman for the new intellectual movement. As Kemp emerged
as America’s first supply-side politician and the movement’s political drum
major, both the New York theoreticians and publicists and the Washington
political economists rallied around him, thereby giving the appearance of
unity to a movement that had in reality appeared in different guises and in
different places virtually simultaneously.50
By April 1976, the new movement had cohered sufficiently to gain its
own appellation. In a paper delivered to a meeting of economists, Herbert
Stein sketched a taxonomy of economic orientations that included a group
he identified as “supply-side fiscalists.” Contrary to the myth that soon grew
up among supply-siders, a myth nurtured by the tendency of some move-
ment faithful to accentuate their challenge to establishment economics,
Stein did not intend the label to be pejorative (although he would quickly
become a spirited critic of supply-side doctrine). Audacious pamphleteer
that he was, Wanniski seized upon the label but dropped the term “fiscalist”
as too limiting. Supply-side economics now had a name.51
That the movement deserved to be singled out as a new, valid, or useful
contribution to the centuries-old effort to understand and better order the
economic affairs of humankind was challenged from the start. To some
critics, the supply-side vision was simply a repackaging of common knowl-
edge; to others, it was a pseudoscience whose relationship to “real” eco-
nomics was similar to the relationship of astrology to astronomy. Herbert
186 > More
Stein argued that the supply-side dogma was old hat, both theoretically and
practically. That supply constituted an important element in economic
analysis was, he wrote, something commonly known since the first parrot
had gotten a Ph.D. in economics for learning to say “supply and demand.”
He considered the Laffer curve argument a “shoddy” echo of the argument
mounted by business conservatives in the early postwar years that tax cuts
could work miracles—increase production, cure inflation, prevent a reces-
sion, raise revenue, and perhaps cure the common cold. “They were
Lafferites before there was a Laffer curve,” he told an audience of profes-
sional economists, “and possibly before there was a Laffer.” In the hands of
such business leaders, Stein recalled archly, supply-side propositions had
been little more than “a way of arguing that what is good for us is good for
you.”52 Supply-siders were guilty of restating the obvious and then using
the resulting dogma to cloak their class and personal interests. The noted
Keynesian economist Paul Krugman dismissed the supply-side movement
as a collection of “cranks” pushing a political agenda rather than an eco-
nomic analysis, less a valid school of conservative economic thought than a
“cult” or “sect.”53
These criticisms contained an undeniable kernel of truth. The supply-
siders themselves admitted rather proudly that they were “basically return-
ing to pre-Keynesian understandings.”54 They agreed they were restating
the obvious, but saw that as an honorable task made necessary by the
decades of misunderstanding that followed the unfortunate triumph of
Keynesian macroeconomics. It is also clear that the supply-side movement
was driven as much by ideological preferences, political expediency, and
unquenchable optimism as by intellectual curiosity, scientific method, or
empirical proof. The supply-side publicist Irving Kristol has written reveal-
ingly that he “was not certain of . . . [the doctrine’s] economic merits but
quickly saw its political possibilities.” He championed the movement
because it promised an alternative to traditional Republican root-canal eco-
nomics, which usually trapped conservatives into “explaining to the popu-
lace, parent-like, why the good things in life that they wanted were all too
expensive.” Supply-side economics, he wrote in the mid-1990s, “offered neo-
conservatism an economic approach that promised steady economic
growth—a sine qua non for the survival of a modern democracy.”55 For
Kristol, the political appeal of supply-side economics outweighed any
uncertainty regarding its theoretical validity or programmatic merit.
If such criticisms hit the mark regarding the most moderate formula-
tions of supply-side economics, they registered even more tellingly against
The Reagan Revolution and Antistatist Growthmanship > 187
more extreme expressions of the doctrine. Having already given the move-
ment its generic name, Herbert Stein in 1981 identified what he perceived as
egregiously unsupportable oversimplifications of the doctrine as “punk sup-
ply-sidism.” He applied the label to brands of supply-side doctrine that he
considered “extreme to the point of being bizarre,” versions that offered both
a “universal explanation” and a “universal solution” and that in the process
crowded out more responsible, if more complicated and difficult, diagnoses
and prescriptions.56 Indeed, moderate supply-siders shared some of Stein’s
concern for the patent exaggerations of their most zealous brethren.
Paul Craig Roberts subsequently blamed Laffer and Wanniski for exag-
gerating the implications of the Laffer curve in suggesting that the govern-
ment could cut taxes without worrying at all about the deficit. They
“covered the supply-side movement with hyperbole,” he complained, and in
the process shifted attention from the central issue of the incentive-creating
effects of tax reduction to the distracting side issue of whether tax cuts
would automatically and immediately pay for themselves. This diversion,
agreed the economist William Niskanen, who served in Reagan’s CEA from
1981 to 1985, “unfortunately trivialized the substantive contribution of the
focus on the micro effects of fiscal policy.”57 Even regarding those micro
effects, the enthusiasm of Laffer and Wanniski could be disconcerting.
When asked whether the incentive effects of reductions in marginal tax
rates might not be necessarily slow to appear, Laffer answered, “How long
does it take you to reach over and pick up a fifty dollar bill in a crowd?”
“That’s how quick it is,” Wanniski agreed, “if the incentive is there, the pro-
duction is there.”58
However, to dismiss moderate supply-siders as religious cultists or to
focus on “punk supply-sidism” obscures the crucial fact that the supply-
siders were not wholly isolated in their essential analysis and policy recom-
mendations. As the 1970s wound down, the U.S. economy was in free fall,
beset by a dramatic drop-off in the rate of productivity growth and a highly
unstable rate of inflation. The dominant postwar policy paradigm, Keynes-
ianism, was in tatters, under assault for both its intellectual inadequacy and
its practical ineffectiveness. In this setting, the supply-siders’ emphasis on
the microeconomic foundations of economic activity and their prescription
of tight monetary policy to combat inflation and incentive-directed tax cuts
to stimulate economic growth found more than a little resonance. Whereas
supply-siders themselves have exaggerated their isolation by romanticizing
their role as a tiny band of brothers struggling bravely against a wrong-
headed establishment, liberals have exaggerated that isolation out of sheer
188 > More
disdain for the supply-side approach. In truth, by the end of the 1970s sup-
ply-side ideas had a significant place in serious discussions of the U.S. politi-
cal economy.
The congressional Joint Economic Committee ( JEC) gave supply-side
thinking an increasingly receptive hearing. In July 1977, the JEC began a
three-and-one-half-year Special Study on Economic Change (SSEC), which
sought to illuminate the changed economic conditions that had resulted in
stagflation in the same way that the congressional Temporary National
Economic Committee had sought in the late 1930s to get at the reasons for
the stubborn duration of the Great Depression. At the outset of the study,
Congressman Richard Bolling, a Missouri Democrat and the vice chairman
of the JEC, observed that “conventional wisdom and established economic
tools” appeared unequal to the “challenge of making sound policies in the
economic sphere” and instructed the Special Study on Economic Change
staff to develop “new policies and modes of adjustment.”
Although the SSEC staff purposely avoided choosing a guiding motif at
the beginning of its work, by the time of its final report two central themes
had emerged: the suddenness and magnitude of the changes that had trans-
formed the U.S. economy in the 1970s, and the compelling need to reject
any “deliberate policies of slow growth or no growth” in favor of a strong
pro-growth program. Recognizing that “traditional” demand management
policies had proven ineffective against the “two-headed monster of inflation
and stagnation” and that “the policies which will best promote growth in
the economy of the 1980s and 1990s may be quite different from those
which worked in other decades,” the SSEC identified a supply-side
approach (without using that label, however) as a major alternative. As
described by the SSEC, such an alternative approach attributed stagnation
largely to “government-induced barriers to work and production caused by
high marginal tax rates and costly government regulation” and inflation
largely to “the excess demand caused by government spending or increases
in the money supply.” Indeed, the SSEC’s own very mild and cautiously
worded recommendations echoed just such an analysis in calling for cuts in
federal spending, a reduction in the rate of growth of the money supply,
increased efforts to remove “unwarranted growth barriers” (i.e., govern-
ment regulation), and “more incentives to save, invest, conduct research,
innovate, produce.”59
The JEC chairman Lloyd Bentsen, who would later serve as Bill Clin-
ton’s first treasury secretary, became an increasingly outspoken champion
of the supply-side approach. In his introduction to the JEC’s 1979 yearly eco-
The Reagan Revolution and Antistatist Growthmanship > 189
nomic report, Bentsen wrote that whereas the chief preoccupation of post-
war economists had for thirty years been how to ensure an adequate level of
aggregate demand, the dramatic changes of the 1970s had finally begun “to
force the attention of the country and its economic experts on the supply
side of the economy.” A year later, he proclaimed “the start of a new era of
economic thinking.” “For too long,” he told the press, “we have focused on
short-run policies to stimulate spending, or demand, while neglecting sup-
ply—labor, savings, investment and production. Consequently, demand has
been overstimulated and supply has been strangled.” To correct the policy
imbalance, the JEC in its 1980 annual report recommended “a comprehen-
sive set of policies designed to enhance the productive side, the supply side
of the economy.”60
From the other side of the partisan divide (but still within the moderate
mainstream of American politics), Arthur Burns, a close economic adviser
to Eisenhower and Nixon and later chairman of the Federal Reserve, pro-
vided early support for a supply-side analysis, although his strong sense of
fiscal rectitude prevented him from backing the particularly dramatic tax
cuts proposed in Kemp-Roth. While at the Fed, Burns asserted in 1975 that
“the economic mind of America” needed to be “reopened.” “We need,” he
said, “a renaissance of economic thinking in our country.” The heart of any
such reorientation, Burns subsequently made clear, would be a shift in the
focus of policy from demand to output. Martin Anderson, who would sub-
sequently emerge as a key White House adviser and contributing architect
of the Reagan Revolution, recalled that Burns was “the first person to intro-
duce me to the essence of supply-side economic policy” while both served
in the Nixon administration.61
Although the community of academic economists accorded supply-side
analysis a distinctly mixed reception, Harvard’s Martin Feldstein made the
National Bureau of Economic Research (NBER) an outpost of supply-side
emphasis, if not doctrine, when he became the organization’s president in
the mid-1970s. Feldstein’s own research was wide-ranging; when he won the
American Economic Association’s prestigious John Bates Clark medal in
1977, the citation lauded his contributions in thirteen different subject areas;
but unifying most of his scholarship was a deep interest in the elasticity, or
incentives, effects of government policies. And incentive effects lay at the
heart of supply-side economics. When the NBER held a two-day confer-
ence in January 1980 to review the postwar experience of the U.S. economy,
Feldstein reported approvingly that “there are at present some signs of
growing public and governmental interest in increasing the rate of capital
190 > More
analysis had, over time, atrophied “because his charm, good looks, and
memory served to get him a long way without additional effort.”66 In a sim-
ilar vein, well-informed journalistic observers have concluded that Reagan’s
“biggest problem was that he didn’t know enough about public policy to
participate fully in his presidency—and often didn’t realize how much he
didn’t know” and that the Reagan presidency would have been far more suc-
cessful “had Reagan not been so lazy.”67
Notwithstanding such weaknesses, Reagan’s opponents learned quickly
enough the cost of underestimating his leadership gifts. Speaker of the
House Thomas P. “Tip” O’Neill greeted the incoming president during the
transition with the derisive comment “Welcome to the big leagues!” When,
within months, Reagan managed to defeat the Democratic majority in the
House on a number of crucial votes, a constituent at home asked O’Neill
what was happening. “I’m getting the shit whaled out of me,” he replied.
Jim Wright, the Democratic House majority leader, expressed a similar
shocked disbelief in a June 1981 diary entry: “Appalled by what seems to me
a lack of depth, I stand in awe nevertheless of . . . [Reagan’s] political skill. I
am not sure that I have seen its equal.”68 The big leagues, indeed!
O’Neill, Wright, and others often learned the hard way that Reagan’s
intellectual weaknesses were counterbalanced by a number of leadership
strengths. The most basic of these was what the conservative columnist
George Will described as Reagan’s “talent for happiness,” an unshakable
optimism as infectious as it was deeply grounded. A classic example was
one of Reagan’s favorite stories during his early days in the White House
(until reporters began to make it the butt of their own gibes). There were, it
went, two youngsters, one an incurable malcontent and the other an incor-
rigible optimist. The boys’ parents decided to temper their sons’ inclina-
tions by means of very different Christmas gifts. Given a roomful of toys,
the malcontent just cried in the corner, certain that all his wonderful pre-
sents would soon break on him. Meanwhile, his brother, given a pile of
horse manure, dove in with great relish, exclaiming with a huge grin as he
dug into the manure, “I just know there’s a pony in here somewhere!”
Reagan projected his personal penchant for positive thinking onto the
broader canvas of American life as well. The nation’s problems, he told the
onlookers at his inauguration in 1981, required “our best effort and our will-
ingness to believe in ourselves and to believe in our capacity to perform
great deeds, to believe . . . we can and will resolve the problems which now
confront us.” “And after all,” he added, in what was the most telling line of
his entire speech, “why shouldn’t we believe that? We are Americans.”69 On
The Reagan Revolution and Antistatist Growthmanship > 193
in that vicinity for the remainder of the decade. As the economist Michael
Mussa has observed, “the demon of inflation . . . had finally been tamed.”86
The administration also made some initial progress in the attempt to
reduce the growth of federal spending and to further the efforts, already
under way and often far advanced during the Carter years, to reduce the
extent of federal regulation. Reagan’s first budget proposal, presented in
February 1981 for fiscal year 1982, called for spending cuts of slightly more
than $45 billion; in the end, the legislative package passed in August was
estimated to trim spending by $35 billion. The latter figure was sufficient to
cause the Democratic chairman of the House Budget Committee to claim
that the reduction in spending constituted “the most monumental and his-
toric turnaround in fiscal policy that has ever occurred.”87 In its drive to
deregulate the economy, the new administration immediately created a task
force on regulatory reform under the leadership of Vice President George
Bush, terminated the price controls on oil remaining from the 1970s, put a
blanket hold on the imposition of new regulations, and filled important
posts with champions of regulatory relief.88
However, the administration’s substantial initial progress in all these
areas was quickly overtaken and overshadowed by a budgetary crisis that
developed even as the basic building blocks of Reaganomics were being put
into place in the summer of 1981. Weeks before the president signed the
Economic Recovery Tax Act of 1981 into law, OMB director David Stock-
man warned of a brewing fiscal disaster. From the outset Stockman, a for-
mer Michigan congressman, had been a driving force in the framing and
implementation of Reaganomics. He possessed, his compatriot Martin
Anderson has written, “the zeal of a newly born-again Christian, the body
of a thirty-four-year-old, and the drive to work fourteen-hour days, includ-
ing Saturdays and some Sundays.” His personality wore better with some
people than with others—Treasury Secretary Donald Regan thought him
“arrogant and antidemocrat”—but his intellectual grasp of budgetary mat-
ters impressed both friend and foe and made him a powerful figure in White
House circles and beyond. Nobody in the administration, perhaps the
whole government, knew as much about the budget, and in early August
1981 Stockman told Reagan and his top aides, “The scent of victory is still in
the air, but I’m not going to mince words. We’re heading for a crash landing
on the budget. We’re facing potential deficit numbers so big that they could
wreck the president’s entire economic program.”89
The problem that Stockman presented to the seemingly barely compre-
hending president and his aides was real, and it quickly got worse. The
200 > More
fiscal year 1983 the deficit reached a peacetime record of 6.3 percent of GNP;
and, overall, the national debt tripled on Reagan’s watch, from $914 billion
in fiscal year 1980 to $2.7 trillion in fiscal year 1989. James M. Poterba, an
MIT economist, has estimated that one-third of the deficit growth under
Reagan resulted from tax reduction, two-thirds from expenditure growth in
the form chiefly of increased transfer payments to individuals, increased
interest payments on federal borrowing, and increased defense spending.96
The reaction to this budgetary distress was a series of grudging tactical
retreats that came to dominate federal budget policy for the remainder of
the 1980s and beyond. For the most part, the impetus for these efforts to
recapture a measure of fiscal probity came from fiscal moderates and old-
style budget-balancers in Congress, abetted by those of Reagan’s advisers,
the budget wizards Stockman and his OMB deputy Richard Darman fore-
most among them, who too late recognized that their original economic
design contained, in the so-called out years of their own projections, the
seeds of fiscal havoc. Reagan himself was most often a passive spectator or,
at best, a hesitant participant in the subsequent attempts at correction,
while the unrepentant “punk supply-siders” among his advisers and else-
where vigorously opposed them. The salvaging effort took the form chiefly
of corrective tax increases (the Tax Equity and Fiscal Responsibility Act of
1982 [TEFRA], the 1983 Social Security Amendments, the Deficit Reduction
Act of 1984 [DEFRA], and the Omnibus Budget Reconciliation Act of 1987
[OBRA]) and spending control measures (Gramm-Rudman-Hollings,
passed in 1985, and Gramm-Rudman of 1987) that set precise deficit targets
and specified the mechanisms to achieve them. In the end, these efforts,
rather than eliminating the deficit as a problem, merely underscored the
fact that record budget deficits and the tripled national debt had become the
central economic and political realities of the Reagan era.
As a result of the unprecedented red ink, the decade from the mid-1980s
through the mid-1990s may well be remembered as the era of the budget.
Between 1982 and 1995, the federal government was forced twelve times
technically to halt operations, however briefly, for lack of funds. Former
presidents Gerald Ford and Jimmy Carter warned Reagan’s Republican suc-
cessor, George Bush, before his inauguration that the federal deficit had
come to dominate decision making “in Congress, in the White House,
throughout the Federal government.” By the end of the 1980s, wrote the
political scientists Joseph White and Aaron Wildavsky, the budget had
become “to our era what civil rights, communism, the depression, industri-
alization, and slavery were at other times.” Extravagant perhaps, but New
204 > More
York’s Democratic senator Daniel Patrick Moynihan agreed that the deficit
had become “the first fact of national government.”97
The overriding political consequence of this defining fact of governance
was its shattering impact on the sort of federal activism strongly identified
with Democratic liberalism. The Reagan administration’s persistent efforts
to dismantle social programs by restricting eligibility, slashing benefits, and
privatizing activities met with only uneven success, but where direct assault
failed, fiscal policy succeeded by indirection: Reagan’s budget deficits effec-
tively defunded the welfare state. The recurring deficits and growing
national debt forced liberals to scurry to protect existing social programs
from budget cuts and made it almost impossible for them to mount new
efforts at the federal level. The fiscal crisis was “Reagan’s revenge,” com-
plained the liberal historian Alan Brinkley, “a back door for doing what
many on the right had been unable to achieve with their frontal assaults in
the 1950s and 1960s.” As Reagan White House aide Tom Griscom observed
with palpable satisfaction, “You can no longer just say, ‘Well, let’s do this
and not worry about either where the money is going to come from or
whether we are going to have to take away from another program or shift
priorities.’” Reduced support for existing programs and the forestalling of
new ones further hurt liberalism by contributing to a general loss of faith
by voters in the capacity of government to address national concerns. To
the horror of liberals, Reagan’s economic ineptitude seemed to weaken
their programmatic potency and political appeal!98
Daniel Patrick Moynihan believed this outcome deliberate. The senator
from New York favored a supply-side tax cut of some sort in 1981 in order to
improve incentives and boost investment, but he distrusted the promises of
the enthusiastic supply-siders around Reagan, observing that they bore the
same relationship to genuine conservatives that anarchists did to liberals.
Moynihan realized almost immediately that the ERTA of 1981 was too large,
and he predicted presciently that it would result in crushing deficits. Within
weeks of the ERTA’s passage, he asked a New York business audience, “Do
we really want a decade in which the issue of public discourse, over and
over and over, will be how big must the budget cuts be in order to prevent
the deficit from being even bigger. Surely, larger, more noble purposes
ought to engage us.”99
By the end of 1983 the senator became convinced, partly on the basis of
conversations with Stockman, who had been a Moynihan protégé (and that
family’s live-in babysitter) while studying at Harvard Divinity School, that
“the early Reagan deficits had been deliberate, that there had been a hidden
The Reagan Revolution and Antistatist Growthmanship > 205
To double the national debt in five years was a disaster. Who would deliberately
bring about a disaster? Nonsense. Agreed. But that was not . . . [my] argument. The
disaster was not deliberate: the deficits were. Which is to say that the deficits were
meant to spur action, which however did not occur, thereby resulting in disaster. A
nice distinction but not, I should have thought, impenetrably subtle.101
Over time, however, the crucial distinction between intentional initial deficits
and the unintended ultimate outcome of an unbroken series of record defi-
cits occasionally blurred in Moynihan’s writing. By the mid-1990s, he wrote
more generally of “the intentional nature of the Reagan deficits” and
implied a larger conspiracy: “They created a crisis. . . . First, the tax cuts of
1981 followed by the severe recession of 1982. Next, the development within
the incumbent [Reagan] administration of a grand strategy of using deficits
to bring about a reduction in the size of government, followed by a disincli-
nation to cut specific programs.” Indeed, Moynihan argued that, even into
the 1990s, “the deficit, with the accompanying debt service, was doing the
job that had been expected from the tax cuts.”102
Was Moynihan’s charge accurate? Had there been a conspiracy pur-
posely to generate huge deficits in order to bring the welfare state to its
knees by “starving the beast”? Stockman denied the charge, asserting that
both the administration’s “rosy scenario” forecast and the Congressional
Budget Office projections used by Congress in developing the ERTA of 1981
had predicted falling deficits under the administration’s budget proposals;
he also denied that anyone within the administration really believed they
were creating huge deficits that could be used effectively to discipline con-
gressional spending. In other words, the deficits were too much of a sur-
prise to have been put to the conspiratorial uses suggested by Moynihan.
Stockman’s deputy at OMB, Richard Darman, called Moynihan’s charge
“way overdrawn,” but granted that both Reagan and Stockman had
believed that the threat or reality of reduced revenue could be used to rein
in the spending habits of the profligate Congress.103
Moynihan was indeed onto something. Stockman’s denial notwithstand-
ing, it is clear that a number of conservatives thought that the way to arrest
206 > More
the growth of the welfare state was to cut off its revenue and let the threat
of any subsequent deficits help move Congress to restrain expenditures. For
too long, they believed, Republicans had attacked the burgeoning liberal
state by trying to curb spending, an approach that left them at the disadvan-
tage of opposing popular liberal “give-away” programs and then, when
defeated, calling for tax increases to cover the excesses of Democratic big
spenders. To the critics, that approach was tantamount to “root-canal eco-
nomics” and had all the political appeal of a trip to the dentist. As was often
the case, Milton Friedman was in the forefront of those calling for a change
in strategy. As early as 1967, he wrote in his Newsweek column that “those of
us who believe that government has reached a size at which it threatens to
become our master rather than our servant” needed to oppose any tax
increase and accept larger deficits as “the lesser of evils.” The Chicago econ-
omist served on Reagan’s pre-election Economic Policy Coordinating Com-
mittee and then on the president’s Economic Policy Advisory Board, and
weeks after Reagan’s inauguration, he put an even finer point on the idea in
another Newsweek column: “If the tax cut threatens bigger deficits, the polit-
ical appeal of balancing the budget is harnessed to reducing government
spending rather than to raising taxes. That . . . is the way that President Rea-
gan proposes to follow.”104
Reagan was not merely conversant with the idea that the size-of-govern-
ment problem was best addressed from the tax, rather than the spending,
side—while governor of California he had, in fact, pioneered that approach
in an episode that has subsequently been largely forgotten. In late 1972, Rea-
gan brought together a group of advisers at the Century Plaza Hotel in Los
Angeles to discuss how to limit government growth. At his prompting, a
small committee, directed by Lew Uhler of the governor’s staff and includ-
ing William Niskanen and Anthony Kennedy (later, members respectively
of the CEA and the Supreme Court), drafted a tax control measure that
would amend the state constitution to limit future taxes to a fixed percent-
age of total personal income (proceeding through stages to a final cap of 7
percent of total personal income) and require a two-thirds majority vote in
both houses of the state legislature for future tax increases. When the state
legislature refused to put the proposed amendment to a vote of the people,
Reagan and his allies took their measure to the voters in the form of an ini-
tiative, Proposition 1.
The governor barnstormed the state with Milton Friedman to drum up
support for what he described as “an idea whose time has come.” “We must
impose some reasonable fiscal restraints,” Reagan told a receptive business
The Reagan Revolution and Antistatist Growthmanship > 207
audience as the battle over Prop 1 spilled over into 1973. “You can lecture
your teenagers about spending too much until you are blue in the face, or
you can accomplish the same goal by cutting their allowance. We think it is
time to limit government’s allowance—to put a limit on the amount of
money they can take from the people in taxes. This is the only way we will
ever bring government spending under control.”105
The voters defeated Prop 1 in November 1973 by a margin of 54–46 per-
cent, but the battle over Reagan’s proposed amendment launched the mod-
ern tax limitation movement. Lew Uhler went on to help found the
National Tax Limitation Committee, which he subsequently led in a strug-
gle for a national balanced budget amendment that continued for over two
decades; and by the end of the 1970s, tax limitation proposals won approval
in California, Michigan, and Missouri. By 1981, the tax-limitation approach
to curbing government spending was much in the air; Ronald Reagan had
helped put it there.106
Thus, in the loose sense foreshadowed by the earlier Prop 1 experience,
the Reagan administration was determined to use the specter of budget
deficits to force Congress to control spending. Reagan himself continued to
believe that cutting government’s allowance would force more responsible
spending behavior. Despite his occasional denial, Stockman obviously
thought along precisely this line. As he recalled in his political memoir (pub-
lished even before the Reagan red ink had dried), the OMB director realized
as early as mid-February 1981 that a looming budget deficit “would become a
powerful battering ram. It would force Congress to shrink the welfare state.
It would give me an excuse to come back to them [for spending cuts] again
and again.”107 As conspiracies go, however, this one was, for those willing to
read between the lines of public pronouncements, a rather poorly kept
secret. Repeating his familiar trope, Reagan himself told the National Associ-
ation of Manufacturers in a March 1982 speech that “increasing taxes only
encourages government to continue its irresponsible spending habits. We
can lecture it about extravagance till we’re blue in the face, or we can disci-
pline it by cutting its allowance.”108 It was the threat of budget deficits that
gave this disciplinary tactic its coercive power. On numerous occasions
throughout 1981, Reagan publicly warned that “without [the spending cuts
requested by the administration] . . . we will have . . . added red ink, an unbal-
anced budget, and more inflationary pressure in the next few years.”109
But the budgetary politics of the 1980s were also more complicated than
Moynihan’s charge of conspiracy allowed. Attitudes were ambivalent and
ambiguous, sometimes even schizophrenic. Those most responsible for the
208 > More
fiscal carnage of the 1980s certainly did not welcome the deficits when they
first appeared. When the threat of red ink failed to elicit the spending cuts
needed to balance the budget and the large deficits became reality, some of
the key plotters in Moynihan’s supposed conspiracy panicked. Stockman,
who later joked that he was one-half supply-sider and the other half “recidi-
vist Hooverite,” quickly became a leading exponent of tax increases to
staunch the fiscal hemorrhaging. This offended the more zealous supply-
siders: Wanniski commented acidly, “Stockman was part of the small band of
revolutionaries, and he went over”; Edwin Meese complained that the OMB
director became “a tax-hike mole in a tax-cutting government.”110 Stockman,
however, was not the only one spooked by the emergent deficit overhang.
Reagan, too, grew worried, as his diary entries over the course of 1982
indicate. In January, the president was resolute: “I told our guys I couldn’t
go for tax increases,” he wrote. “If I have to be criticized, I’d rather be criti-
cized for a deficit rather [sic] than for backing away from our economic pro-
gram.” But after a budget briefing on election day in November (an off-year
contest that saw the Republicans lose twenty-five seats in the House), his
tone was more distressed: “We really are in trouble. Our one time projec-
tions, pre-recession, are all out the window and we look at $200 billion defi-
cits if we can’t pull some miracles.” In early January 1983, he shared his
growing anguish with his Budget Review Board: “We can’t live with out-
year deficits. I don’t care if we have to blow up the Capitol, we have to
restore the economy.”111
Expressing his concern several weeks later in his 1983 State of the Union
address, the president himself broke with his hard-core supply-side supporters,
calling the deficit problem “a clear and present danger to the basic health of
our Republic” and proposing a standby tax “because we must ensure reduction
and eventual elimination of deficits over the next several years.” At the time of
his 1984 reelection campaign, Reagan considered cutting the deficit and balanc-
ing the budget the chief domestic tasks for his second term.112 Even Treasury
Secretary Donald Regan, one of the administration’s most dedicated supply-
siders, came to believe that the projected $221 billion deficit for fiscal year 1986
meant the administration had “reached the danger point.”113
Although Reagan had long recognized the political usefulness of the
deficit threat, there is compelling reason, beyond the clear evidence of his
growing concern already cited, to doubt that he purposely engineered the
series of deficits that actually occurred. The administration wanted the
intimidation of potential deficits, not the reality of actual ones. For one
thing, the advisers closest to the president were convinced that the supply-
The Reagan Revolution and Antistatist Growthmanship > 209
side tax cut would so boost growth as to leave the federal government with
more, not less, revenue after the tax cuts. As Stockman wrote derisively,
“The whole California gang had taken . . . [the Laffer curve] literally (and
primitively).” The revenue increase generated by the tax cut was called
“reflow,” a label that gave wishful thinking the aura of economic science.114
Those who worried about the lost revenue were deemed not sufficiently
appreciative of the “reflow” principle.115 Throughout 1981, Reagan invoked
the reflow concept, pointing reassuringly to historical precedent to prove his
point. “There’s still that belief on the part of many people,” he observed
sadly but wisely to reporters in February 1981, “that a cut in tax rates auto-
matically means a cut in revenues. And if they’ll only look at history, it does-
n’t. A cut in tax rates can very often be reflected in an increase in government
revenues because of the broadening of the base of the economy.”116
In Reagan’s case, the stubborn belief in reflow was both an intellectual
infatuation with punk supply-sidism and a particularly vivid example of the
way that his unquenchable optimism significantly influenced public policy.
It also captured just how quintessentially—and powerfully—economic
growth continued to express both personal and national optimism at the
beginning of the 1980s. In December 1981, the president complained to an
interviewer about those “who kind of chickened a little” in the face of
yawning deficit projections, whereas his “own feeling—you could call it
optimism—is, we haven’t even seen the [supply-side tax cut] program work
yet.” Martin Feldstein, chair of the CEA in 1982–84, has remarked that,
despite the Council’s increasingly grim deficit projections, Reagan “contin-
ued to hope that higher growth would come to his rescue.”117
Moreover, in this case Reagan’s optimism was determinative. It cannot
be dismissed as the affectation of a figurehead leader, who specialized in
presidential pomp and public relations while leaving the heavy lifting of pol-
icymaking to staffers. Rather, the president himself called the shots that
determined the parameters of policy. For example, it was Reagan who
decided in the summer of 1981 that the administration would not compro-
mise with those congressional Democrats who insisted that the third year
of the Reagan personal income tax cut be made contingent on further
progress in reducing spending. “I can win this,” he told Murray Weiden-
baum, who served as the first chair of Reagan’s CEA, and thus the die was
cast. “I wonder,” the economist later mused, “if we would have those
remaining triple-digit budget deficits if he had compromised.”118
Even as growth failed him and the unprecedented deficits began to pile
up, Reagan’s optimism held firm and he put the best face possible on devel-
210 > More
It is one of the great ironies of the 1980s that Reagan’s stumbling success in
his ideological endeavor to limit the perceived leftward drift of government
came at the expense of his economic goal of accelerated long-term growth.
The deficits that effectively prevented any substantive extension of the wel-
fare state (beyond the inertial advance of middle-class entitlements) at the
same time compromised the drive to make the economy more productive.
The administration’s record on growth was lackluster. It is a further irony
that when the deficits generated by the administration’s supply-side
approach helped the economy recover from the 1981–82 recession, they suc-
ceeded because they boosted demand in the short run; the impact of the
deficits on the supply side of the economy—investment and productivity—
operated in the long run to undercut economic growth.
The economic impact of the large Reagan deficits was substantial, but
just how substantial and to what degree harmful have proven to be contro-
versial questions. It will not do to oversimplify a complex matter. Even
among professional economists, there was much empirical and analytical
The Reagan Revolution and Antistatist Growthmanship > 211
The economy got Bill Clinton elected in 1992. The incumbent Republican
George Bush had wrapped himself in the mantle of his predecessor and,
Slow Drilling in Hard Boards > 215
promising to consolidate the Reagan Revolution, had during the 1988 cam-
paign dramatically pledged, “Read my lips: No new taxes.” But the federal
deficits kept coming, and under the pressure of the Gramm-Rudman-
Hollings deficit reduction legislation passed in the mid-1980s to deal with
the skyrocketing Reagan deficits, Bush felt compelled to renege on his
promise. Grudgingly, he worked with Democratic congressional leaders to
pass a tax hike in 1990. Hard-core conservatives cried foul, and neither
Bush’s management of the spectacular coalition victory in the Gulf War,
nor his subsequent admission in early 1992 that breaking his no-tax pledge
had been a mistake, could assuage their anger. An economic downturn
solidified the resentment of the GOP’s right wing.
As the 1992 campaign unfolded, Clinton’s advisers sensed that the Repub-
lican president was vulnerable on the issue of the domestic economy. In the
Democratic campaign headquarters that insiders nicknamed the War Room,
James Carville, one of Clinton’s chief political strategists, posted the phrase
“The economy, stupid” to ensure that everyone remembered to emphasize
the Democrats’ most compelling argument. In the event, the mild recession
combined with lingering uneasiness about budget deficits, rising health care
costs, and slipping international economic competitiveness to drive a crucial
portion of the normal Republican presidential constituency into the arms of
the Democratic challenger and the third-party spoiler Ross Perot. After his
narrow electoral victory, Clinton observed, “The economy is why we started
down this road . . . [and] the economy is why the American people gave me
the chance . . . to turn this country around.”2
The Clinton team put growth at the center of its economic thinking
from the beginning. Publicized during the campaign under the title
“Putting People First,” Clinton’s “national economic strategy” called for a
program of massive public investment in human capital and physical infra-
structure—the “most dramatic economic growth program since the Sec-
ond World War.”3 Public investment of this supply-side sort (as opposed to
public spending conceived of as a contribution to aggregate demand) had a
pedigree that went back to the public power and rural electrification initia-
tives of the New Deal and the developmental program of public investment
espoused by Alvin Hansen in his more optimistic phase during World War
II, which liberals at the beginning of the 1990s were newly rediscovering.4
The most influential champion of public investment among Clinton’s
advisers was the diminutive Robert Reich, a Rhodes scholar contemporary
of the president’s. Armed with a law degree and a talent for persuasion but
innocent of formal advanced training in the field of economics, Reich had
216 > More
emerged over the course of the 1980s as a key liberal policy entrepreneur in
the area of the political economy. An outspoken advocate of industrial pol-
icy, he came to see public investment as a politically more attractive means
to the same ends: “The only becoming-richer strategy,” he wrote at the end
of the Reagan Revolution, “is to invest in our future productivity.”5 And
now, in the early 1990s, as Reich recounted in his engaging but self-serving
memoir, Clinton had actually “used my ideas.”6
The public investment strategy had strong appeal. Six Nobel laureates in
economics endorsed “Putting People First,” and at the economic summit
convened by the president-elect in Little Rock at the end of 1992, the Prince-
ton economist Alan Blinder sounded the “very simple theme” that “inade-
quate investment in our people, in the quality of our workforce, has been a
big part of the problem we’ve been hearing about, and that correcting that
should be a big part of the solution.” It was, Clinton responded, “sort of
preaching to the choir when you make this argument to me.”7
Not surprisingly, Clinton asked Reich to head his economic policy team
during the transition and then named him secretary of labor in the new cab-
inet, while Blinder joined the Council of Economic Advisers, which in turn
would be chaired by another champion of public investment, Laura d’An-
drea Tyson. At the newly created National Economic Council (Clinton’s
effort to construct an agency that would coordinate economic policy for the
global economy in the same way that the National Security Council had
worked to coordinate security policy for the purposes of the Cold War),
deputy director Gene Sperling represented a strong public investment point
of view. Outside the formal governmental structure, Clinton’s favored polit-
ical consultants, James Carville and Paul Begala, plumped hard for greater
public investment.
A competing view of national economic priorities exerted a powerful
counterinfluence on the administration, however. It held that deficit reduction
was the nation’s top priority. During the struggle for the Democratic nomina-
tion in 1992, former Massachusetts senator Paul Tsongas hammered away
with a single-minded intensity at the pressing need for deficit reduction.8 The
same message drove Ross Perot’s third-party run at the presidency. “The debt,”
Perot told voters, “is like a crazy aunt we keep down in the basement. All the
neighbors know she’s there, but nobody wants to talk about her.”9 Largely
because of the efforts of Tsongas and Perot, Americans confronted the extra-
ordinary deficits hanging over the U.S. economy more directly than ever
before. Political commentators seemed to agree that continuing large budget
deficits had several consequences and that all of them were bad.
Slow Drilling in Hard Boards > 217
wealth that was lent out for long periods, and they shared a strong desire to
see that their loans were repaid without costly losses due to inflation. They
were, historically, the sound money faction. When the so-called bond mar-
ket spoke, it was incumbent on a president who claimed to be a “New
Democrat”—both pro-growth and pro-business—to listen.
The dispute over whether to emphasize public investment or deficit
reduction was extended and bitter. The issue was one of emphasis, but the
stakes were high and the outcome promised to establish a fundamental
aspect of the Clinton presidency. Clinton’s populist political consultants
were horrified at the prospect of a conservative turn. They believed that too
much deficit reduction would sacrifice vigorous growth, which served espe-
cially society’s less well-off, in order to minimize inflation as a favor to the
well-to-do. Begala called Budget Director Panetta “the poster boy of eco-
nomic constipation,” and James Carville began addressing Rubin as “Nick,”
pretending to confuse him with George Bush’s treasury secretary, Nicholas
Brady. “I used to think if there was reincarnation,” Carville complained to
journalists, “I wanted to come back as the president or the pope or a .400
baseball hitter. But now I want to come back as the bond market. You can
intimidate everybody.”12 As the administration leaned toward increased
deficit reduction, Clinton bewailed a rightward drift that he himself was
overseeing: “I hope you’re all aware we’re the Eisenhower Republicans
here,” he railed sarcastically to his advisers. “We stand for lower deficits and
free trade and the bond market. Isn’t that great?”13 Yet he believed also that
the nation had “lost control over our financial affairs” and that the deficit
was “like a bone in our throat.” In the end, Clinton decided to side with the
deficit hawks. When Congress finally passed the administration’s economic
program in August 1993, Reich complained that his original public invest-
ment proposals had been reduced to “a tiny morsel.”14
The administration won the battle for congressional approval of its eco-
nomic program, but the advocates of public investment feared that their
side had lost the larger war for the soul of the Clinton presidency. The
administration was, Reich noted, now locked in a “conceptual prison.” “In
due time,” he worried, “we will end up incarcerated in a ‘balanced’ budget.
. . . [And] a balanced budget will require massive cuts in spending.”15 In
actuality, the pressure to go beyond cutting the deficit to actually balancing
the budget did intensify over the next several years. The Republicans used
the issue in 1994 to help them gain control of Congress for the first time
since the early Eisenhower years and they continued to press for reductions
in the scale and scope of government spending; in 1997, the administration
Slow Drilling in Hard Boards > 219
Arthur Burns and the charismatic Objectivist philosopher Ayn Rand. The
two gave him an abiding regard for free market capitalism and an equally
strong aversion to inflation. In the late 1960s, Greenspan joined the Nixon
presidential campaign and remained an informal adviser to the administra-
tion; he succeeded Herbert Stein as chairman of the CEA in 1974; and after
Nixon’s resignation, he served President Gerald Ford in that capacity for the
duration of his term.20
The Clinton administration alternately wooed, cajoled, and subtly
threatened Greenspan and the Fed to keep short-term interest rates low to
offset the contractionary impact of deficit reduction, while waiting for that
same deficit reduction gradually to drive down long-term rates. Both the
White House and the Fed chairman desired the maximum sustainable eco-
nomic growth consistent with controlling inflation, and their convergence
of interests was symbolically displayed by Greenspan’s being seated next to
Hillary Rodham Clinton in the House of Representatives gallery at the pres-
ident’s first State of the Union address, in February 1993. For the most part,
Greenspan cooperated with administration policy. “We’re trying to have a
more restrictive fiscal policy and our hope is we’ll have room for a more
expansive monetary policy,” he observed in May 1993.21
Although there were inevitable moments of tension, especially when
the Fed raised the short-term rates in 1994 and 1995 to combat what it per-
ceived as threatening signs of inflation, both the unelected central bank and
the highly political Clinton administration were committed to growth with
low inflation; both believed that deficit reduction and cautious monetary
oversight constituted the best available path to that goal. Consequently,
Clinton surprised no one when in 1996 he reappointed Greenspan to
another four-year term; the president and the Federal Reserve chairman
were, the chief executive later joked, “the odd couple.”22 In announcing his
decision to retain Greenspan, Clinton observed that the administration had
enjoyed “a respectful and productive relationship with the Federal Reserve”
and that “together our efforts have helped to create a climate for sustained
economic growth, the lowest combination of unemployment, inflation,
and mortgage rates in 27 years.”23
the right stood a large segment of American business. Both the Chamber of
Commerce of the United States and the National Association of Manufac-
turers argued that policymakers at the White House and the Fed were giving
too much weight to the struggle against inflation and consequently settling
for too low a level of economic growth. In 1995 the NAM board of directors
unanimously demanded a commitment to higher growth. The group
resolved that “the common assumption that the economy cannot exceed
annual growth rates of 2.5 percent without risking a resurgence of inflation
does not reflect changed economic realities”; the NAM called a target range
of 3.0 to 3.5 percent in GPD growth “realistic and appropriate.”34 Business
Week advocated what it called “a strong pro-growth position,” arguing that
U.S. productivity was higher and inflation lower than government statistics
indicated and that the global economy now served more effectively than
before to constrain prices; in light of these new realities, it believed faster
growth without renewed inflation to be both possible and desirable.35
For a season, the Republican Party appeared to identify with such con-
cerns, partly out of rational conviction, partly because of the kind of ideo-
logical inertia running over from the 1980s, and partly, no doubt, because
they could find little other purchase for an issue-oriented economic critique
of a Democratic president whose slipperiness and resilience matched even
that of his famously “Teflon-coated” predecessor, Ronald Reagan. The mat-
ter crystallized as a partisan issue during the 1996 presidential campaign.
First, the publisher Malcolm S. “Steve” Forbes ran for the Republican nomi-
nation on an unabashedly 1980s-style tax-cutting, pro-growth platform.
Forbes’s combination of personal loopiness and supply-side zealotry was
easy enough to mock—Herbert Stein commented sharply that America
“could afford Ronald Reagan once . . . [but] we cannot afford him again”—
but Forbes’s ideas managed to outlive his candidacy.36
When former senator Bob Dole, long a champion of fiscal probity and
deficit reduction and a leader of what some derided as the “political-econ-
omy-as-root-canal-surgery” faction within the Republican Party, won the
nomination, he surprised nearly everyone by picking as his vice presidential
running mate the hyperkinetic cheerleader of the Republican growth tribe,
Jack Kemp. Dole had already declared that if elected, he would “liberate the
great engine of free enterprise”; the addition of Kemp to the ticket and the
decision to build the Republican campaign around the proposal of a massive
15 percent tax cut gave Dole’s somewhat ambiguous earlier pro-growth dec-
laration an unmistakable supply-side inflection.37 Not even the defeat of the
Dole-Kemp ticket at the polls could extinguish the call for faster growth.
Slow Drilling in Hard Boards > 225
growth of the labor force [slightly over 1 percent per year] and the growth in
productivity [also slightly over 1 percent]. Arguments about growth have to
work through one or both of these factors to be credible. . . . Together,
these rates produce today’s ‘gloomy’ view of potential growth of 2.2 to 2.5
percent. It’s not rocket science or conspiracy. It’s math.”49
If the math regarding growth was inexorable—and those who believed
that the global economy was now governed by a “new paradigm” believed
otherwise—the desire for faster growth was nevertheless understandable.
After all, the rate of growth from the Civil War to 1973 had averaged 3.4 per-
cent a year, but since 1973 only 2.3 percent. The accumulated loss of this
one-third decline in growth in the two decades after 1973—the difference
between what the historical rate of growth would have yielded and the
actual performance of the economy—has been estimated by Jeffrey
Madrick at $12 trillion.50 A loss of wealth that large was stunning enough;
when viewed against the demands that were sure to be made on Americans
and their economy in the foreseeable future, it became truly alarming.
Life in twenty-first-century America promised challenges aplenty for cit-
izens and policymakers alike, as needs pressed ever more tightly against
resources, and many of the most vexed and vexing issues would be those for
which faster growth offered considerable relief. Of the ominous problems
confronting Americans in the foreseeable future, none would be more
threatening than the growing gap between rich and poor. For three decades,
the well-off and well-educated in the United States had steadily pulled away
from the poor and unskilled. There were many reasons for the develop-
ment. Kevin Phillips, a longtime Republican strategist, created a stir in 1990
by blaming the rising inequality on the class warfare policies of Ronald Rea-
gan; but as inequality actually accelerated in the early years of the Clinton
presidency, it became clear that although government policies might exacer-
bate the trend on the margins through sins of both commission and omis-
sion, the main causes of the widening gap between rich and poor lay in
technological change and global competition.51
Although faster growth alone could not reverse the trend, the advocates
of faster growth believed that their policies could at least cushion the blow
by reducing unemployment, creating a tighter labor market wherein work-
ers had more bargaining power and generating the resources needed to sup-
port more generous social welfare and long-term public investment
programs. Without such indirect relief or a more direct attack, increasing
inequality threatened to deny America’s claim to be the world’s first middle-
class society. Without “a huge program of re-educating and retraining . . .
Slow Drilling in Hard Boards > 229
been true in the recent past. Testifying on the state of the economy before a
House subcommittee in mid-July 1997, Greenspan left open the possibility
that the economy might have moved into a new era that would allow a
higher level of noninflationary growth. “From the Federal Reserve’s point
of view,” he declared, “the faster the better.”58 Nevertheless, the resolution
of the new-era/faster-growth issue promised to rest more on a technical
assessment than on grand ideological visions, and for the foreseeable future
policymakers will seek to ensure that their growth targets meet the primary
economic criterion of sustainability and the political criterion of the
appearance of discipline.
Clinton’s disciplined brand of post-ideological growthmanship was still
worthy of the name, but his attenuation of that old creed represented a
difference sufficiently great as to be a change in kind rather than merely of
degree. While Nixon and Carter, each in his own way, sought to lead the
United States into what they perceived as a new era of limits, Clinton, with-
out fanfare, had actually taken the nation there. After the long, heroic phase
of the American presidency that coincided with the crises of the Great
Depression, World War II, and the Cold War, Clinton managed—partly by
the accident of personal scandal and partly by design—to downsize the
presidency, inadvertently diminishing its dignity and self-consciously scaling
down both its role and the expectations surrounding it. “F.D.R.’s mission,”
he told his chief speech writer in 1998, “was to save capitalism from its own
excesses. Our mission has been to save government from its own excesses so
it can again be a progressive force.” 59
The administration’s economic program, social welfare policy, and
posture in world affairs all bespoke the change. It was confirmed, in a
backhanded way, by Clinton’s insistence, particularly noticeable after the
1994 Republican electoral takeover of Congress, on using the bully pulpit
of the presidency to establish himself as, depending on one’s own political
lights, the nation’s moral leader or national nanny. In either case, this
preachy posture was largely explained by the old chestnut “talk is cheap,”
a fact that Clinton hoped to turn to his advantage in a time of downsized
vision and capacity.
The shift from the previous regimes of hyperactive growthmanship to
the new, chastened variety helped mark the end of an era. The postwar
epoch was defined by four great national projects: first, the Cold War; sec-
ond, the struggle at home for full citizenship for African Americans,
women, and a host of other minority groups; third, in the sociocultural
realm, the cultivation of a set of values perhaps best described as “expres-
232 > More
Conclusion
1970, Ben Wattenberg and Richard Scammon published The Real Majority, in
which they advanced not only a seminal interpretation of voting behavior
in the 1960s but a general theory of the elections as well. They argued that
politics was driven increasingly by what they labeled “the social issue,” mat-
ters of cultural values and social behavior that had become coequal with
economic concerns in determining the shape of the American political
landscape. Their argument was powerful and their insight has since exerted
an important influence on how Americans think about their political sys-
tem and how politicians seek election and behave in office. Michael Barone
recently reiterated the point, writing that “in the United States politics more
often divides Americans along cultural than along economic lines.”1
Surely Wattenberg, Scammon, and Barone are right in contending that
cultural politics matter. One wonders, however, whether their insight has
not been embraced too fervently, leaving us with a one-dimensional way of
thinking about public affairs that now overemphasizes the cultural determi-
nants of political life and loses sight of the enduring, albeit never exclusive,
significance of such “traditional” concerns as political economy. If much
political behavior, especially electoral behavior, is determined by cultural
issues—and who, in the heyday of identity politics, can doubt that?—public
policy, a slightly but significantly different aspect of civic culture, continues
to be dictated directly and influenced indirectly by the substance of political
economy. The overlap among economics, politics, and policy has indeed
mattered, not just in the 1992 election (“The economy, stupid”) but
throughout the postwar period.
The present study’s second overarching conclusion is that the growth-
manship we have traced was strikingly protean. Growth was pursued as a
goal in its own right in a variety of theoretical and practical ways. Some
sought to achieve it via policies directed at the demand side; others relied on
supply-side initiatives. These approaches differed in both their conceptual
underpinnings and their practical implications. Most significant, leaders and
policymakers pursued growth as a means of achieving a striking variety of
other ends. Postwar liberals saw growth as the vehicle for transformative
social change; Richard Nixon viewed growth as a way to overcome the rav-
ages of liberal decay. Jimmy Carter looked upon balanced growth as a way
to accommodate a new era of limits; Ronald Reagan considered unbounded
growth a way to transcend limits and at the same time arrest the drift toward
a European-style social democracy. Throughout, growth politics took a vari-
ety of forms for a variety of purposes: domestic liberal reform, conservative
restoration, world leadership and international influence, global economic
236 > More
reflects this hard-won knowledge. Under Clinton, the pursuit of growth has
approached the sort of practical problem-solving-by-deft-technique that
Keynes had in mind when, in a fit of unusual but admirable professional
humility, he declared that economists ought to be like dentists.11 The history
of growthmanship in the postwar era confirms the great theoretician’s point.
Yet it remains true that the acceptance of limits in the pursuit of growth
brings its own painful consequences. Growth has often been America’s
“out”—the way, many believed, that the nation could somehow square the
circle and reconcile its love of liberty with its egalitarian pretensions. With-
out the promise of particularly rapid growth to resolve this tension at the
core of the American enterprise, we are at century’s end left with a task fully
challenging enough to test, and perhaps again to tap, whatever reserves of
national genius and greatness we carry with us into the new millennium.
Notes
Preface
1. Maurice Stans to Paul McCracken, 7 December 1970, WHCF:SMOF: McCracken:
Box 28, Nixon President Materials, National Archives, Washington, D.C. (hereafter,
NPM).
2. New York Times, 16 December 1970.
3. U.S. Presidents, Public Papers of the Presidents, Richard Nixon, 1970, 1134–36. Gal-
braith’s comments on the cult of production are found in The Affluent Society
(Boston, 1958), esp. ch. 9.
4. Alan Wolfe, America’s Impasse: The Rise and Fall of the Politics of Growth (New York,
1981), 10.
5. Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (New York,
1937), 69.
6. David M. Wrobel, The End of American Exceptionalism: Frontier Anxiety from the Old
West to the New Deal (Lawrence, Kans., 1993).
Prologue
1. Twelve Southerners, I’ll Take My Stand: The South and the Agrarian Tradition, introd.
by Louis D. Rubin Jr. (Baton Rouge, La., 1977). See also Paul Conkin, The Southern
Agrarians (Knoxville, Tenn., 1988).
2. Lyle Lanier, “Discussion: The Agrarian-Industrial Metaphor,” in A Band of Prophets:
The Vanderbilt Agrarians After Fifty Years, ed. William C. Havard and Walter Sullivan
(Baton Rouge, La., 1982), 167; John Crowe Ransom, “Reconstructed But Unregener-
ate,” in I’ll Take My Stand, 8, 12.
3. James C. Cobb, The Selling of the South: The Southern Crusade for Industrial Develop-
ment, 1936–1980 (Baton Rouge, La., 1982), 5–63; idem, Industrialization and Southern
Society, 1877–1984 (Lexington, Ky., 1984), 27–50.
4. Quoted in Howard P. Segal, Technological Utopianism in American Culture (Chicago,
1985), 122; “Toward a New System,” The Nation, 7 September 1932, 205; and William
E. Akin, Technocracy and the American Dream: The Technocrat Movement, 1900–1941
(Berkeley, Calif., 1977), 150.
242 > Notes
20. Quoted in Patrick J. Maney, “Young Bob” La Follette: A Biography of Robert M. La Fol-
lette, Jr., 1895–1953 (Columbia, Mo., 1978), 206. See also John E. Miller, Governor Philip
F. La Follette, The Wisconsin Progressives, and the New Deal (Columbia, Mo., 1982), ch. 7.
21. Quoted in Rosenof, Dogma, Depression, and the New Deal, 92.
22. Roosevelt, Public Papers and Addresses, 6:5.
23. John Morton Blum, From the Morgenthau Diaries: Years of Urgency, 1938–1941 (Boston,
1964), 41; Herbert Stein, The Fiscal Revolution in America (Chicago, 1969), 120–23; James
Patterson, Congressional Conservatism and the New Deal (Lexington, Ky., 1967), 288–324.
24. Brinkley, End of Reform, 86–91; Ellis Hawley, The New Deal and the Problem of Monop-
oly: A Study in Economic Ambivalence (Princeton, 1966), 187–269.
25. Jeffrey L. Meikle, Twentieth Century Limited: Industrial Design in America, 1925–1939
(Philadelphia, 1979), 189–90. See also Helen A. Harrison et al., Dawn of a New Day:
The New York World’s Fair, 1939/40 (New York, 1980).
26. Keynes to J. M. Clark, 26 July 1941; and Walter Salant to Joseph Dorfman, 8 June 1971,
both in Box 1, Walter Salant MSS, Harry S. Truman Presidential Library (hereafter
HSTL).
27. See Bryd L. Jones, “The Role of Keynesians in Wartime Policy and Postwar Plan-
ning, 1940–1946,” American Economic Review 62 (May 1972):125–33; John Kenneth Gal-
braith, “The National Accounts: Arrival and Impact,” in U.S. Bureau of the Census,
Reflections of America: Commemoration of the Statistical Abstract Centennial (Washing-
ton, 1980), 75–80; and John Brigante, The Feasibility Dispute: Determination of War Pro-
duction Objectives for 1942 and 1943 (Washington, D. C., 1950).
28. Quoted in Richard A. Lauderbaugh, American Steel Makers and the Coming of the Sec-
ond World War (Ann Arbor, Mich., 1976), 78.
29. John Kenneth Galbraith, “The National Accounts,” 77.
30. I. F. Stone, Business As Usual (New York, 1941), 122.
31. Quoted in Lauderbaugh, American Steel Makers, 82.
32. Bruce Catton, The War Lords of Washington (New York, 1948), 46.
33. John Kenneth Galbraith, A Life in Our Times: Memoirs (Boston, 1981), 149.
34. The best account is Lauderbaugh, American Steel Makers, 87–107. See also Gerald T.
White, Billions for Defense: Government Financing of the Defense Plant Corporation Dur-
ing World War II (University, Ala., 1980).
35. U.S. Bureau of the Budget, The United States at War: Development and Administration of
the War Program by the Federal Government (Washington, D. C., 1946), 339–53; and Wal-
ter Wilcox, The Farmer in the Second World War (Ames, Iowa, 1947), 45.
36. Russell Weigley, The American Way of War (New York, 1973), 146.
37. Ronald Schaffer, Wings of Judgment: American Bombing in World War II (New York, 1985),
166; Winston S. Churchill, The Hinge of Fate (Boston, 1950), 346. See also Kent Roberts
Greenfield, American Strategy in World War II: A Reconsideration (Baltimore, 1963), 74.
38. Richard M. Leighton, “The American Arsenal Policy in World War II: A Retrospec-
tive View,” in Some Pathways in Twentieth-Century History, ed. Daniel R. Beaver
(Detroit, 1969), 221–22.
39. Ibid., 225, 251; John Craf, A Survey of the American Economy, 1940–1946 (New York,
1947), 178.
244 > Notes
40. R. Elberton Smith, The Army and Economic Mobilization (Washington, D. C., 1959),
9–11; Robert H. Connery, The Navy and Industrial Mobilization in World War II (Prince-
ton, N.J., 1951), 3; Frederic C. Lane, Ships for Victory: A History of Shipbuilding Under
the U.S. Maritime Commission in World War II (Baltimore, 1951), 4. The statistic for
cargo vessels and tankers is for the period 1939–45.
41. Donald M. Nelson, Arsenal of Democracy: The Story of American War Production (New
York, 1946), 259.
42. “National Industrial Conference Board Round-table, May 26, 1943,” Box 18, Tran-
scripts, Records of the National Industrial Conference Board, Hagley Library, Wilm-
ington, Delaware.
43. U.S. National Resources Planning Board, Security, Work, and Relief Policies (Washing-
ton, D. C., 1942), 545.
44. U.S. National Resources Planning Board, National Resources Development: Report for
1943. Part I. Post-War Plan and Program (Washington, D. C., 1943), 4.
45. Frederic A. Delano et al. to FDR, 24 August 1943, OF 1092, Franklin D. Roosevelt
Presidential Library, Hyde Park, New York.
46. Hansen to Gerhard Colm, 11 July 1944, Box 1, Gerhard Colm MSS, HSTL.
47. Hansen to David McCord Wright, 30 July 1945, HUG (FP)-3.50, Box 2, Alvin Hansen
MSS, Harvard University.
48. Roosevelt, Public Papers and Addresses of Franklin D. Roosevelt, 12:574–75; 13:369–78.
49. Theodore Rosenof, “The Economic Ideas of Henry A. Wallace, 1933–1948,” Agricul-
tural History 41 (April 1967): 143–53; John Morton Blum, “Portrait of the Diarist,” in
Blum, ed., The Price of Vision: The Diary of Henry A. Wallace, 1942–1946 (Boston, 1973),
3–49; Henry A. Wallace, Sixty Million Jobs (New York, 1945); and Norman D.
Markowitz, The Rise and Fall of the People’s Century: Henry A. Wallace and American
Liberalism, 1941–1943 (New York, 1973).
50. Walter P. Reuther, “Reuther Challenges `Our Fear of Abundance,’” New York Times
Magazine, 16 September 1945, 8.
51. Paul Hoffman, speech to the National Association of Manufacturers, 6 December
1944, Box 2, Edwin Nourse MSS, HSTL.
52. Quoted in Herman E. Krooss, Executive Opinion (Garden City, N.Y., 1970), 306–7.
53. Richard S. Tedlow, New and Improved: The Story of Mass Marketing in America (New
York, 1990), 328–35.
54. U.S. Presidents, Public Papers, Harry S. Truman, 1946, 125.
Chapter 1
1. Memo, “Postwar Employment,” 9 October 1944, Box 1, Colm MSS, HSTL.
2. Committee for Economic Development, Taxes and the Budget: Program for Prosperity
in a Free Economy (New York, 1947), 10.
3. Chester Bowles, Promises to Keep: My Years in Public Life, 1941–1969 (New York, 1971), 161–62.
4. Chester Bowles, Tomorrow Without Fear (New York, 1946), 44.
5. CEA to Truman, 13 December 1946, Box 1, John D. Clark MSS, HSTL.
6. Craufurd D. Goodwin, “Attitudes toward Industry in the Truman Administration:
The Macro Origins of Micro-Economic Policy,” paper presented at the Truman
Notes > 245
Centennial Symposium, Woodrow Wilson Center, September 1984. See also Edwin
Nourse, “The Professional Background of the First Chairman of the Council of
Economic Advisers,” August 1963, Box 1, Nourse MSS, HSTL.
7. Erwin C. Hargrove and Samuel A. Morley, eds., The President and the Council of Eco-
nomic Advisers: Interviews with CEA Chairman (Boulder, Colo., 1984), 79.
8. U.S. Council of Economic Advisers, First Annual Report to the President (Washington,
D. C., 1946), 9, 12.
9. U.S. Council of Economic Advisers, Second Annual Report to the President (Washing-
ton, D. C., 1947), 7.
10. Ibid.
11. Ibid., 27.
12. Ibid., 10, 19.
13. U.S. Council of Economic Advisers, Business and Government: Fourth Annual Report to
the President (Washington, D. C., 1949), 3, 5, 6, 7.
14. Leon Keyserling to John D. Clark, 26 November 1956, in Box 5, Keyserling Papers,
HSTL; and Keyserling Oral History Memoir, HSTL. See also Keyserling, “New Eco-
nomics for New Problems,” 4 December 1951, OF 396, Box 1076, HSTL.
15. Leon Keyserling, “Economic Outlook for Sales Management,” May 1949, General
File/Keyserling, President’s Secretary’s File, HSTL.
16. Gerhard Colm, Memo, 4 May 1950, OF 396, Box 1076, HSTL.
17. Charles S. Maier, “The Politics of Productivity: Foundations of American International
Economic Policy After World War II,” International Organization 31 (Autumn 1977): 629.
18. Michael J. Hogan, The Marshall Plan: America, Britain, and the Reconstruction of West-
ern Europe, 1947–1952 (New York, 1987), 23.
19. Quoted in David W. Ellwood, Rebuilding Europe: Western Europe, America, and Postwar
Reconstruction (London, 1992), 229.
20. U.S. Presidents, Public Papers, Harry S. Truman, 1949, 3. Compare, for example, the
State of the Union Address and the Special Message to Congress on the President’s
Economic Report in January with July’s Report to the American People on the State
of the National Economy, ibid., 1–7, 13–26, 369–74.
21. Ibid., 494. On Keyserling’s overall influence, see Lester H. Brune, “Guns and Butter:
The Pre-Korean War Dispute Over Budget Allocations,” American Journal of Econom-
ics and Sociology 48 ( July 1989): 357–71; Alonzo L. Hamby, “The Vital Center, the Fair
Deal, and the Quest for a Liberal Political Economy,” American Historical Review 77
( June 1972): 653–78; Donald K. Pickens, “Truman’s Council of Economic Advisers
and the Legacy of New Deal Liberalism,” in Harry S. Truman, The Man from Inde-
pendence, ed. William F. Levantrosser (New York, 1986), 245–63.
22. Edwin G. Nourse, Economics in the Public Service: Administrative Aspects of the Employ-
ment Act (New York, 1953), 243–46; CEA to Truman, 14 January 1949, and “Draft of
Interagency Working Group: A Bill,” 15 January 1949, both in OF 396, Box 1076, HSTL.
23. Nourse, Economics in the Public Service, 246–48; and the diary entries for 18 June and 6
July 1949, Box 6, Nourse MSS, HSTL.
24. Steve Fraser, “The `Labor Question,’” in The Rise and Fall of the New Deal Order,
1930–1980, ed. Steve Fraser and Gary Gerstle (Princeton, N.J., 1989), 57; and Nelson
246 > Notes
45. Keyserling, “New Economics for New Problems,” 4 December 1951, OF 396, Box
1076, HSTL.
46. Nourse, Daily Diary, 26 November 1946, Box 3, Nourse MSS, HSTL.
47. Hargrove and Morley, eds., Interviews with CEA Chairmen, 58.
48. Joseph Feeny to Truman, 26 January 1950; and Truman to Secretary of the Treasury,
31 January 1950, both in OF 396, HSTL.
49. Donald Wallace to Nourse, July, 1947, Box 1, Nourse MSS, HSTL. See also Nourse to
Wallace, 3 May 1948, Box 5, Nourse MSS, HSTL.
50. Nourse to Paul Douglas, 2 August 1949, in Daily Diary 1949, Box 6, Nourse MSS,
HSTL.
51. Roy Blough to William Hewett, 1 November 1950; and Blough to Paul Parker, 26
December 1950, both in Box 9, Blough MSS, HSTL.
52. Nourse, Economics in the Public Service, 210.
53. Pickens, “Truman’s Council of Economic Advisers,” 250–51; Nourse quoted in
Michael J. Hogan, A Cross of Iron: Harry S. Truman and the Origins of the National Secu-
rity State, 1945–1954 (New York, 1998), 279.
54. Hogan, Cross of Iron, 279–84.
55. Leon Keyserling Oral History Memoir, HSTL.
56. J. L. Fisher to Keyserling, 14 February 1952, in Box 11, Blough MSS, HSTL.
57. W. W. Rostow, The Process of Economic Growth, 2nd ed. (New York, 1962), v; Simon
Kuznets, “Comment,” 180.
58. Stuart Rice to Henry A. Wallace, 22 December 1944, Box 32, Stuart Rice MSS, HSTL.
59. The discussion of national income accounting that follows is based on Paul Studenski,
The Income of Nations. Part I, History (New York, 1961); Edgar Z. Palmer, The Meaning and
Measurement of the National Income and of Other Social Accounting Aggregates (Lincoln,
Nebr., 1966); John W. Kendrick, “The Historical Development of National-Income
Accounts,” History of Political Economy 2 (Fall 1970): 284–315; and Carol S. Carson, “The
History of the United States National Income and Product Accounts: The Development
of an Analytical Tool,” The Review of Income and Wealth 21 (June 1975): 153–81.
60. CEA to Truman, 4 April 1947, Box 1, Clark MSS, HSTL.
61. John D. Clark, “The President’s Economic Council,” unpublished manuscript [1948],
chapter 4, 23, in Box 3, Clark MSS, HSTL.
62. Walter Salant to Staff, 16 April 1947, Box 2, Walter Salant MSS, HSTL.
63. On the history of federal statistical programs, see Bureau of the Budget, Office of
Statistical Standards, “Functions and Operations,” November 1952, Box 12, Rice MSS,
HSTL.
64. On the wartime use of statistics, see the correspondence in Box 32, Rice MSS, HSTL.
65. Bureau of the Budget, Division of Statistical Standards, “Statistical Requirements in
the Readjustment Period: Detailed Plans for a Government-wide Program,” 1
November 1944, Box 13, Rice MSS, HSTL.
66. Rice to Assistant Director, Bureau of the Budget, 25 November 1944, Box 7; Harold
D. Smith to Truman, 25 April 1945, Box 8, both in Rice MSS, HSTL.
67. See, for example, the memo “Integrity of Government Statistics: 1946 Controversy,”
Box 114, Rice MSS, HSTL.
248 > Notes
68. Rice to Frederick J. Lawton, 2 February 1949, Box 8, Rice MSS, HSTL.
69. This trichotomy is borrowed from Milton Moss, “Changing Boundaries of Federal
Statistics,” March 1969, Box 164, Rice MSS, HSTL.
70. Nourse, Economics in the Public Service, 166–67.
71. Gerhard Colm, “The Nation’s Economic Budget: A Tool of Full Employment Pol-
icy,” in National Bureau of Economic Research, Studies in Income and Wealth, vol. 10
(New York, 1947), 89.
72. George Soule, New York Times Book Review, 1 February 1948, 29.
73. Gerhard Colm to Staff, 14 October 1947, Box 4, Nourse MSS, HSTL.
74. Nourse, Economics in the Public Service, 233.
75. “The Operations of the Council of Economic Advisers,” 15 May 1950, Box 11, Blough
MSS, HSTL; National Bureau of Economic Research, Long-Range Economic Projection
(Princeton, N.J., 1954).
76. Hargrove and Morley, eds., Interviews with CEA Chairmen, 73.
77. Keyserling to Committee of Experts on the New England Economy, 15 May 1950,
OF 396, Box 1076, HSTL.
78. Flash, Economic Advice, 62–99; Leon Keyserling Oral History Memoir, HSTL; and
Hargrove and Morley, eds., Interviews with CEA Chairmen, 52–54, 77–84.
79. Walter Heller, New Dimensions of Political Economy (Cambridge, Mass., 1966), 29.
80. Truman to Keyserling, 15 January 1953 and 19 September 1963, both in Box 1, Keyser-
ling MSS, HSTL; Alonzo Hamby, Man of the People: A Life of Harry S. Truman (New
York, 1995), 500–501.
81. The Wardman Park group is discussed in Cabell Phillips, The Truman Presidency (Bal-
timore, 1966), 162–65; and the Leon Keyserling and C. Gerard Davidson Oral History
Memoirs, HSTL.
82. Jonathan Hughes, The Vital Few: The Entrepreneur and American Economic Progress,
expanded ed. (New York, 1986), ix.
83. W. Robert Brazelton and Willadee Wehmeyer, “Leon H. Keyserling and Mary
Dublin Keyserling, Growth and Equity: Over Fifty Years of Economic Policy and
Analysis, From Roosevelt and Truman to Bush,” unpublished manuscript (1989),
16–17, Keyserling MSS, HSTL.
84. The best treatment of postwar optimism and the consumer culture, indeed the best
synthetic guide to early postwar history, is James T. Patterson, Grand Expectations:
The United States, 1945–1974 (New York, 1996).
Chapter 2
1. Alvin H. Hansen, The Postwar American Economy: Performance and Problems (New
York, 1964), 5.
2. Andrew Hacker, ed., U/S: A Statistical Portrait of the American People (New York,
1983), 13–14.
3. The Statistical History of the United States from Colonial Times to the Present (Stamford,
Conn., 1965), 462.
4. Quoted in William Leuchtenburg, A Troubled Feast: American Society Since 1945, rev.
ed. (Boston, 1979), 55.
Notes > 249
28. Eisenhower, Waging Peace, 377; Nixon quoted in Stephen Ambrose, Nixon: The Educa-
tion of a Politician, 1913–1962 (New York, 1987), 487; Stans quoted in “Russian v. U.S.
Growth,” Time, 14 December 1959, 90; Henry Hazlitt, “Rates of Growth,” Newsweek,
25 August 1958, 73; Hazlitt, “Wrong Aims and Means,” Newsweek, 9 March 1959, 100;
Hazlitt, “The ‘Growth’ Game,” Newsweek, 2 March 1959; 73.
29. Quoted in U.S. Congress, Joint Economic Committee, Comparisons of the United
States and Soviet Economies, Papers Submitted by Panelists Appearing Before the Subcom-
mittee on Economic Statistics, Pts. 1–3 (Washington, D.C., 1959), 549.
30. Walter Lippmann, “America Must Grow,” Saturday Evening Post, 5 November 1960,
92.
31. Quoted in U.S. Congress, Joint Economic Committee, Comparisons of the United
States and Soviet Economies, Papers, 549; U.S. Congress, Joint Economic Committee,
Comparisons of the United States and Soviet Economies, Hearings before the Joint Eco-
nomic Committee, 86th Cong., 1st sess., 1959.
32. Legislative Reference Service, Soviet Economic Growth: A Comparison with the United
States, A Study Prepared for the Subcommittee on Foreign Economic Policy of the
Joint Economic Committee (Washington, D.C., 1957), 24.
33. Ibid., 24, 136.
34. U.S. Congress, Joint Economic Committee, Comparisons of the United States and
Soviet Economies, Hearings, 6.
35. Ibid., 11.
36. “Russian v. U.S. Growth,” Time, 14 December 1959, 90.
37. Domar quotation from U.S. Congress, Joint Economic Committee, Comparisons of
the United States and Soviet Economies, Hearings, 247; Lovestone and Peterson quota-
tions from U.S. Congress, Joint Economic Committee, Comparisons of the United
States and Soviet Economies, Papers, 567, 525.
38. Prospect for America: The Rockefeller Panel Reports (Garden City, N.Y., 1961), xv, 251,
251–333 passim.
39. The National Purpose (New York, 1960), v, 120, 38, 133.
40. Goals for Americans: The Report of the President’s Commission on National Goals (New
York, 1960), 10–11.
41. Paul H. Douglas and Howard Shuman, “Growth Without Inflation,” New Republic,
26 September 1960, 22.
42. William R. Allen, “Thoughts on Economic Growth: The Full and Efficient Use of
Resources,” New Republic, 6 June 1960, 13, 16.
43. James Tobin, “Growth Through Taxation,” New Republic, 25 July 1960, 15, 18.
44. Leon H. Keyserling, “Investment and Consumption,” New Republic, 10 October 1960,
17–19.
45. Quoted in Arthur M. Schlesinger Jr., A Thousand Days: John F. Kennedy in the White
House (Boston, 1965), 625.
46. Quoted in Richard Goodwin, Remembering America: A Voice from the Sixties (Boston,
1988), 99.
47. The Democratic platform is reprinted in Arthur M. Schlesinger Jr., ed., History of
American Presidential Elections, 1789–1968 (New York, 1971), 4:3482.
Notes > 251
76. U.S. Department of State, Foreign Relations of the United States, 1952–1954, Diplomatic
Papers, vol. 2, pt. 1, National Security Affairs (Washington, D.C., 1984), 236.
77. On the “New Look” policy, see Russell F. Weigley, The American Way of War: A His-
tory of United States Military Strategy and Policy (New York, 1973), ch. 17; Glenon H.
Snyder, “The ‘New Look’ of 1953,” in Warner R. Schilling et al., Strategy, Politics, and
Defense Budgets (New York, 1962); and Stephen E. Ambrose with Richard H. Immer-
man, Ike’s Spies: Eisenhower and the Espionage Establishment (New York, 1981).
78. Dulles quoted in Saki Dockrill, Eisenhower’s New-Look National Security Policy, 1953–61
(London, 1996), 217; NSC-162/2 quoted in Michael J. Hogan, A Cross of Iron: Harry S.
Truman and the Origins of the National Security State, 1945–1954 (New York, 1998), 407;
James Tobin, “Defense, Dollars, and Doctrines,” The Yale Review 47 (March 1958):
324–25. It should be noted, however, that Hogan sees more continuity than change
between the Truman and Eisenhower national security policies.
79. Henry A. Kissinger, “Strategy and Organization,” Foreign Affairs, April 1957, 379–94.
80. Ambrose, Education of a Politician, 551; Weigley, American Way of War, 428–29.
81. Maxwell D. Taylor, The Uncertain Trumpet (New York, 1960), 6.
82. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1963–64, 1:494.
83. Schlesinger Jr., ed., History of Presidential Elections, 4:3471; John F. Kennedy, A Compendium
of Speeches, Statements, and Remarks Delivered During His Service in the Congress of the
United States, Senate Document 79, 88th Cong., 2d sess. (Washington, D.C., 1964), 929.
84. Theodore Sorensen, Kennedy (New York, 1965), 608.
85. Weigley, American Way of War, 448.
86. Gaddis, Strategies of Containment, ch. 7; Townsend Hoopes, The Limits of Intervention:
An Inside Account of How the Johnson Policy of Escalation in Vietnam Was Reversed (New
York, 1973), 17–18; Sorensen, Kennedy, 632–33.
87. U.S. Department of Defense, Annual Report for Fiscal Year 1962 (Washington, D.C.,
1963), 3; Gaddis, Strategies of Containment, 226.
88. Gaddis, Strategies of Containment, 261.
89. James Gavin, War and Peace in the Space Age (London, 1959), 128; Taylor, Uncertain
Trumpet, 24.
90. Schlesinger Jr., A Thousand Days, 315–16.
91. Memorandum, Rostow to Kennedy, 29 March 1961, quoted in George McT. Kahin,
Intervention: How America Became Involved in Vietnam (New York, 1986), 131.
92. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1963–64, 2:953.
93. Ibid., 1:114, 822.
94. Robert H. Haveman, ed., A Decade of Federal Antipoverty Programs: Achievements, Fail-
ures, and Lessons (New York, 1977), 11.
95. Tobin, “Political Economy of the 1960s,” 33; Okun is quoted in Hargrove and Mor-
ley, eds., Interviews with CEA Chairmen, 275.
96. Goodwin, Remembering America, 270.
97. Doris Kearns, Lyndon Johnson and the American Dream (New York, 1976), 222.
98. Tobin, “Political Economy of the 1960s,” 35.
99. Sar A. Levitan and Robert Taggart, The Promise of Greatness (Cambridge, Mass., 1976), 29.
100. Walter Lippmann, column, Washington Post, 19 March 1964, sec. A.
Notes > 253
101. U.S. Council of Economic Advisers, Economic Report of the President, 1964 (Washing-
ton, D.C., 1964), 77.
102. Carl M. Brauer, “Kennedy, Johnson, and the War on Poverty,” Journal of American
History 69 ( June 1982): 108.
103. Lester C. Thurow, “Discussion,” in Decade of Federal Antipoverty Programs, ed. Have-
man, 118.
104. Joseph A. Kershaw, “The Attack on Poverty,” in Poverty in America, ed. Margaret S.
Gordon (San Francisco, 1965), 56.
105. Ibid., 57.
106. James Tobin, National Economic Policy: Essays (New Haven, Conn., 1966), vii.
107. See, for example, David E. Shi, The Simple Life: Plain Living and High Thinking in
American Culture (New York, 1985).
108. Burns quoted in Walter P. Reuther, “Goals for America,” in National Priorities: Mili-
tary, Economic, and Social (Washington, D.C., 1969), 66.
109. Arthur M. Schlesinger Jr., “Where Does the Liberal Go from Here?” New York Times
Magazine, 4 August 1957, 7, 38.
110. Arthur M. Schlesinger Jr., “The Shape of National Politics to Come,” in Box 22,
Leon Keyserling MSS, HSTL.
111. John Kenneth Galbraith, A Life in Our Times: Memoirs (Boston, 1981), 325; idem, The
Affluent Society (New York, 1958), 152–53.
112. Leon Keyserling, “Eggheads and Politics,” New Republic, 27 October 1958, 13–17
(quoted material appears on p. 16). See also “Galbraith and Schlesinger Reply to
Leon Keyserling,” ibid., 10 November 1958, 14–15; Keyserling, “Leon Keyserling on
Economic Expansion: A Communication,” ibid., 17 November 1958, 16–17; and cor-
respondence among the principals in Box 38, John Kenneth Galbraith Papers, JFKL,
and Box 22, Keyserling MSS, HSTL.
113. Schlesinger Jr., A Thousand Days, 657.
114. Quoted in Raymond A. Bauer, ed., Social Indicators (Cambridge, Mass., 1966), xii.
115. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1963–64, 1:704.
116. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1966, 1:246–47. See also Bertram
M. Gross, “Preface: A Historical Note on Social Indicators,” in Social Indicators, ed.
Raymond A. Baver, ix-xviii; and Otis Graham Jr., Toward a Planned Society: From Roo-
sevelt to Nixon (New York, 1976), ch. 4.
117. U.S. Department of Health, Education, and Welfare, Toward A Social Report (Ann
Arbor, Mich., 1970).
118. Samuel P. Hays, Beauty, Health, and Permanence: Environmental Politics in the United
States, 1955–1985 (New York, 1987), 54–55.
119. Martin V. Melosi, “Lyndon Johnson and Environmental Policy,” in The Johnson Years:
Volume Two, ed. Robert A. Divine (Lawrence, Kans., 1987), 121.
120. John F. Kennedy, “Preface,” in Stewart Udall, The Quiet Crisis (New York, 1963), xiii;
Schlesinger Jr., A Thousand Days, 659.
121. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1965, 2:1101.
122. Quoted in Melosi, “Johnson and Environmental Policy,” 117. On Lady Bird Johnson’s
role, see Lewis L. Gould, Lady Bird Johnson and the Environment (Lawrence, Kans., 1988).
254 > Notes
123. Lyndon Baines Johnson, The Vantage Point: Perspectives of the Presidency, 1963–1969
(New York, 1971), 324.
124. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1965, 1:199–201.
125. Levitan and Taggart, Promise of Greatness, 21.
126. Johnson quoted in Jack Valenti, A Very Human President (New York, 1975), 345. On the
crucial July 1965 troop commitment, see Larry Berman, Planning a Tragedy: The
Americanization of the War in Vietnam (New York, 1982); and Kahin, Intervention,
347–401.
Chapter 3
1. Time, 22 March 1968, 24.
2. Fred Smith to Fowler, 16 March 1968, Henry Fowler Papers, Box 82, Lyndon B. John-
son Presidential Library, Austin, Texas (hereafter LBJL); Time, 22 March 1968, 24;
Edward Fried Oral History Memoir (hereafter OHM), p. 19, LBJL.
3. Time, 22 March 1968, 24; March 29, 1968, 81.
4. Joseph W. Barr OHM, Tape 2, p. 8, LBJL; Fried OHM, p. 19, LBJL; Walt Rostow to
LBJ, memo, 15 March 1968, Memos to the President, National Security File, Box 31,
LBJL.
5. Introductions to the Bretton Woods regime include Alfred E. Eckes Jr., A Search for
Solvency: Bretton Woods and the International Monetary System, 1941–1971 (Austin, Tex.,
1975), ch. 6; John S. Odell, U.S. International Monetary Policy: Markets, Power, and Ideas
as Sources of Change (Princeton, 1982), 80–88; Robert Solomon, The International
Monetary System, 1945–1981, updated ed. (New York, 1982), ch. 2; and Michael D.
Bordo, “The Bretton Woods International Monetary System: A Historical
Overview,” in A Retrospective on the Bretton Woods System: Lessons for International
Monetary Reform, ed. Michael D. Bordo and Barry Eichengreen (Chicago, 1993), 3–85.
6. Alvin H. Hansen, The Postwar American Economy: Performance and Problems (New
York, 1964), 74–75.
7. U.S. Presidents, Public Papers, John F. Kennedy, 1961, 58.
8. Dwight D. Eisenhower, The White House Years: Waging Peace, 1956–1961 (Garden City,
N.Y., 1965), 603–7, quotation from 606.
9. Arthur M. Schlesinger Jr., A Thousand Days: John F. Kennedy in the White House
(Boston, 1965), 654; Theodore C. Sorensen, Kennedy (New York, 1965), 407–10;
George Ball OHM, Interview 2, pp. 28–30, LBJL; Public Papers, John F. Kennedy, 1961,
57–66.
10. On the Kennedy program, see Hansen, Postwar American Economy, 76–77; Amy Elisa-
beth Davis, “Politics of Prosperity: The Kennedy Presidency and Economic Policy”
(Ph.D. diss., Columbia University, 1988), 186–210, 384–428; and Robert V. Roosa, The
Dollar and World Liquidity (New York, 1967), 3–39.
11. Gardner Ackley OHM, Tape 2, p. 47, LBJL.
12. Frederick Deming OHM, Tape 2, p.7, LBJL.
13. U. S. Department of the Treasury, Maintaining the Strength of the U.S. Dollar in a
Strong Free World Economy (Washington, D.C., 1968), 9, 47.
14. Arthur Okun OHM, Tape 2, p. 4, LBJL.
Notes > 255
15. The statistics are from Arthur Okun, Cabinet Meeting Minutes, May 29, 1968, Cabi-
net Papers, Box 13, LBJL.
16. Gardner Ackley to Johnson, memo, 27 December 1965, WHCF, CF, FI 4, LBJL.
17. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1966, 1:48.
18. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1967, 2:733. For a good discussion of
LBJ’s efforts in 1966 to control inflation without a tax hike, see Joseph A. Califano Jr.,
The Triumph and Tragedy of Lyndon Johnson: The White House Years (New York, 1991),
137–48. Regarding the struggle to develop a tax program, see Harvey C. Mansfield Sr.,
Illustrations of Presidential Management: Johnson’s Cost Reduction and Tax Increase Cam-
paigns (Austin, Texas, 1988); Henry Fowler OHM, Tape 3, p. 9, LBJL; and “Chronology
of President Johnson’s Tax Proposals, 1965–66,” Aides Files, Califano, Box 54, LBJL.
19. Gardner Ackley OHM, Tape 1, p.34, and Tape 2, p. 17, LBJL. The quotation is from
the latter.
20. Arthur Okun OHM, Tape 2, p. 13, LBJL.
21. Gardner Ackley OHM, Tape 2, p. 42, LBJL. In March 1966 McNamara strongly
opposed Treasury Secretary Fowler’s suggestion of a public review of the need for a
tax increase, fearing that such would incite Congress to cut Great Society programs.
See Joe Califano to LBJ, 22 March 1966, Confidential File, FG 795, Box 41, LBJL.
22. Lyndon Baines Johnson, The Vantage Point: Perspectives of the Presidency, 1963–1969
(New York, 1971), chap. 19 passim; Arthur M. Okun, The Political Economy of Prosper-
ity (Washington, D.C., 1970), 71. On the important role played by the chief economic
editorialists of the New York Times and Washington Post, see Walter Heller OHM,
Tape 2, pp. 47–48, LBJL. The Gallup poll is in New York Times, 24 January 1968.
23. Gardner Ackley OHM, Tape 1, p. 32, LBJL.
24. See, for example, “Our Congressmen—Who Is Best? Who Is Worst?” Pageant Maga-
zine, November, 1964, 6–14; and Julius Duscha, “The Most Important Man on Capi-
tol Hill Today,” New York Times Magazine, 25 February 1968, 30ff.
25. Wilbur Cohen OHM, Tape 2, p. 6, LBJL.
26. Quoted from Sorensen, Kennedy, 426.
27. Wilbur Mills OHM, Tape 1, p. 37, LBJL.
28. Ibid., Tape 1, p. 38. See also p. 21 for similar sentiments.
29. Wilbur Mills, speech, “Expenditures and Taxes in the Context of Today’s Problems,”
20 November 1967, Cabinet Papers, Box 11, LBJL.
30. Duscha, “Most Important Man on Capitol Hill,” 72.
31. Wilbur Mills, speech, “Some International and Domestic Aspects of Tax and Expen-
diture Policy,” 3 December 1968, Box 420, Wilbur Mills Papers, Hendrix College,
Conway, Arkansas.
32. Wilbur Mills, speech at Hazen, Arkansas, 15 March 1968, Box 420, Mills Papers.
33. Wilbur Mills to B. Freeland, 19 October 1967, Box 509, Mills Papers.
34. Wilbur Mills, “Statement . . . on the Necessity for Establishing Controls over the
Future Course of Federal Spending,” 6 October 1967, Box 425, Mills Papers; and
Wilbur Mills to H. Hodge, 25 June 1968, Box 509, ibid.
35. Charles L. Schultze to Johnson, memo, 16 September 1967, Aides Files, Califano, Box
54, LBJL.
256 > Notes
36. The discussion that follows draws heavily on “The Gold Crisis, Nov. 1967–March
1968,” undated manuscript, and “Gold Crisis—1967: Chronology and Annotated
Index of Documents,” undated manuscript, both in National Security File, National
Security Council History, Box 53, LBJL.
37. Frederick Deming OHM, Tape 2, p. 18, LBJL. A high-level British perspective on the
1967 sterling devaluation episode is found in Harold Wilson, A Personal Record: The
Labour Government, 1964–1970 (Boston, 1981), ch. 23.
38. The Group of Ten was created in 1961 to enlarge the lending resources of the IMF.
Its members—the United States, Britain, Germany, France, Italy, the Netherlands,
Belgium, Sweden, Canada, and Japan—agreed to provide additional money to the
IMF and to communicate together regarding developments in the international
monetary system.
39. Henry Fowler to Johnson, memo, 12 November 1967, National Security File,
National Security Council History, Box 53, LBJL.
40. Henry Fowler to Johnson, memo, 13 November 1967, ibid.
41. Gardner Ackley to Johnson, memo, 27 November 1967, ibid. The gold pool has been
described by one of the policymakers who helped create it as “a little bit like a cartel,
but in the interests of the world monetary system.” See Robert Roosa, OHM, Tape
1, pp. 23–26, LBJL.
42. “Memorandum of Conversation: Highlights of Meeting of Deming Group with
Secretary Fowler on Gold Policy,” 24 November 1967, National Security File,
National Security Council History, Box 53, LBJL. Deming, however, flew to Frank-
furt and on 26 November negotiated a renewed agreement among the seven
remaining members of the gold pool (Belgium, Germany, Italy, the Netherlands,
Switzerland, Britain, and the United States—France, an original member, had
dropped out earlier in 1967) to maintain a firm line on the gold price in London. See
Gardner Ackley to Johnson, memo, 27 November 1967, ibid.
43. Cabinet Meeting Minutes, 20 November 1967, Cabinet Papers, Box 11, LBJL. For sim-
ilar sentiments, see E. Ernest Goldstein OHM, Tape 3, p. 2, LBJL.
44. Press release, “Statement by the President,” 18 November 1967, National Security
File, National Security Council History, Box 53, LBJL. The overall strategy and
Fowler’s quoted remarks are from “Notes on the President’s Meeting with Biparti-
san Leadership,” 20 November 1967, Meeting Notes File, Box 2, LBJL. See also
“Notes on the President’s Meeting with the Leadership,” 19 November 1967, ibid.
45. “Gold Pool Activity,” attachment I to “The Gold Crisis, Nov. 1967–March 1968,” man-
uscript, n.d., National Security File, National Security Council History, Box 53, LBJL.
46. “Gold Pool Activity”; and Walt Rostow to Johnson, memo, 12 December 1967, both ibid.
47. Summary of telephone call, Hubert Ansiaux to William McChesney Martin, Friday,
15 December 1967; and Walt Rostow to Johnson, 15 December 1967, both ibid.
48. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1968–69, 1:8–13; “The Balance of
Payments Program of New Year’s Day, 1968,” manuscript, n.d., and “The President’s
Balance of Payments Message of January 1, 1968: Chronology and Annotated Docu-
ments,” both in National Security File, National Security Council History, Box 54,
LBJL; and Frederick Deming OHM, Tape 2, pp. 8–16.
Notes > 257
49. Gardner Ackley to Johnson, memo, 6 January 1968, National Security File, National
Security Council History, Box 54, LBJL.
50. Gardner Ackley to Johnson, memo, 21 December 1967. See also “Minutes of the
Cabinet Committee on Balance of Payments,” 21 December 1967, both ibid.
51. New York Times, 1 March 1968.
52. Walt Rostow to Johnson, 14 March 1968, National Security File, National Security
Council History, Box 53, LBJL.
53. Walt Rostow to Johnson, 23 January 1968, ibid.
54. Ernest Goldstein to Johnson, memo, 24 January 1968, National Security File,
National Security Council History, Box 54, LBJL; and Walt Rostow to Johnson,
memo, 14 February 1968, Box 53, ibid.
55. “The Gold Crisis,” National Security File, National Security Council History, Box 53,
LBJL; Joseph Barr OHM, Tape 2, pp. 9–10, LBJL; and Frederick Deming OHM, Tape
2, pp. 30–34, LBJL.
56. “Gold Pool Activity,” National Security File, National Security Council History, Box
53, LBJL.
57. The pressures building early in 1968 are well treated in “The Gold Crisis,” National
Security File, National Security Council History, Box 53, LBJL. On the continued
weakness of sterling, see Barbara Ward Jackson, memo, 23 January 1968; Gardner
Ackley to Johnson, memo, 24 January 1968; and Walt Rostow to Johnson, memo, 23
January 1968, all ibid.
58. Henry Fowler to Johnson, memo, 4 March 1968; and Walt Rostow to Johnson,
memo, 8 March 1968, both ibid.
59. Bundy quoted from “The Dollar Is Not as Bad as Gold,” Time, 12 January 1968, 16.
60. Walt Rostow to Johnson, memo, 12 March 1968, Diary Backup, Box 92, LBJL.
61. The discussion that follows relies heavily on “The Gold Crisis,” National Security
File, National Security Council History, Box 53, LBJL.
62. Henry Fowler OHM, p. 33, LBJL.
63. Rusk to Amconsul Frankfurt and others, telegram, 15 March 1968, National Security
File, National Security Council History, Box 53, LBJL.
64. Johnson to Kiesinger, telegram, 15 March 1968, National Security File, National
Security Council History, Box 53, LBJL. The administration’s rationale for opposing
any increase in the official price of gold is found in T. Page Nelson to Hunt, 16 Feb-
ruary 1968, Fowler Papers, Box 83, LBJL.
65. “Communiqué,” 17 March 1968, National Security File, National Security Council
History, Box 53, LBJL. See also the discussion in Solomon, The International Monetary
System, 119–24. Solomon was a participant at the Washington meeting and helped
draft its final communiqué.
66. Time, 29 March 1968, 80.
67. Arthur Okun OHM, p. 23, LBJL. On Carli’s role, see Frederick Deming OHM, Tape
2, p. 29, LBJL.
68. “Communiqué,” 17 March 1968, National Security File, National Security Council
History, Box 53, LBJL.
69. Sorensen, Kennedy, 407.
258 > Notes
70. Ibid.; Odell, U.S. International Monetary Policy, 129; T. P. Nelson to Fowler, 3 July 1967,
Fowler Papers, Box 84, LBJL. Martin’s remark is from Congressional Record—Senate,
26 June 1967, S 8875.
71. U.S. Presidents, Public Papers, Johnson, 1968–69, 1:33; Joseph Barr OHM, Tape 2, p. 10,
LBJL.
72. “Communiqué,” 17 March 1968, National Security File, National Security Council
History, Box 53, LBJL.
73. Odell, U.S. International Monetary Policy, 129; Solomon, The International Monetary
System, 128–50; and Frederick Deming OHM, Tape 2, pp. 34–45, LBJL.
74. “The Dollar Is Not as Bad as Gold,” Time, 12 January 1968, 17; “Gold Fever Rises to
Record Heat,” Business Week, 16 March 1968, 31.
75. Henry Fowler OHM, Tape 3, p. 31, LBJL.
76. Arthur Okun to Johnson, memo, 23 March 1967, National Security File, National
Security Council History, Box 53, LBJL. On the outcome of the tax struggle, see
Kettl, “Economic Education of Lyndon Johnson,” 70–71; and Charles Zwick OHM,
Tape 2, pp. 5–9, LBJL.
77. Wilbur Mills OHM, p. 35, LBJL.
78. Johnson, The Vantage Point, 451; Wilbur Mills, speech at England, Arkansas, 27
August 1968, Box 420, Mills Papers; Frederick Deming OHM, Tape 1, p. 34, LBJL.
79. U.S. Presidents, Public Papers, Johnson, 1968–69, 1:545–46.
80. Arthur Okun to Johnson, memo, 29 July 1968, WHCF, EX FI9, Box 53, LBJL; Okun,
Notes for Cabinet Meeting, 5 September 1968, Cabinet Papers, Box 14, LBJL.
81. Joseph Barr OHM, Tape 1, p. 28, LBJL.
82. Gordon, Economic Instability and Growth, 179–85.
83. Robert Eisner, “Fiscal and Monetary Policy Reconsidered,” American Economic
Review 59 (December 1969): 897–905; and Eisner, “What Went Wrong?” Journal of
Political Economy 79 (May-June 1971): 629–41.
84. Wilbur Mills OHM, p. 12, LBJL.
85. Solomon, The International Monetary System, 176 ff.
86. See Thomas L. Friedman, “A Nixon Legacy Devalued By a Cold War Standard,” New
York Times, 1 May 1994.
87. “Notes of the President’s Foreign Affairs Luncheon,” 30 January 1968, Tom John-
son’s Notes of Meetings, Box 2, LBJL.
88. Clark Clifford OHM, Tape 4, p. 33, LBJL.
89. William Westmoreland, cable MAC 01049, 22 January 1968, National Security File,
Memos to the President (Rostow), Box 27, LBJL.
90. William Westmoreland, cable MAC 0161, 4 February 1968, ibid., Box 28.
91. Peter Braestrup, Big Story: How the American Press and Television Reported and Inter-
preted the Crisis of Tet 1969 in Vietnam and Washington, 2 vols. (Boulder, Colo., 1977).
92. George Christian OHM, p. 9, LBJL.
93. Earle Wheeler to Johnson, memo, 27 February 1969, Tom Johnson’s Notes of Meet-
ings, Box 2, LBJL. The origins of the February 1968 troop request have been the stuff
of controversy. See “The Origins of the Post-Tet 1968 Plans for Additional American
Forces in RVN.” 9 November 1970, DSDUF File, Box 3, LBJL; William C. Westmore-
Notes > 259
land, A Soldier Reports (New York, 1976), 350–59; Mark Perry, Four Stars (Boston, 1989),
173–89; and Clark Clifford, Counsel to the President: A Memoir (New York, 1991), 472–83.
94. “Notes of the President’s Meeting with Senior Foreign Policy Advisers,” 4 March
1968, Tom Johnson’s Notes of Meetings, Box 2, LBJL.
95. Charles Zwick to Johnson, 2 March 1968, Clifford Papers, Box 1, LBJL.
96. Clark Clifford OHM, Tape 3, p. 15, LBJL.
97. “Notes of the President’s Meeting with Senior Foreign Policy Advisers,” 9 February
1968, Tom Johnson’s Notes of Meetings, Box 2, LBJL.
98. “Notes of the President’s Meeting with Senior Foreign Policy Advisers,” 4 March
1968, ibid.
99. Henry Fowler to Johnson, memo, 1 March 1968, National Security Council History,
Box 53, LBJL; “Difficulties and Negative Factors in the Course of Action,” n.d., Tab.
G, Box 1, Clifford Papers, LBJL. See also Henry Fowler, “Economic and Financial
Problems and Measures,” memo, 3 March 1968, ibid.
100. Walt Rostow to Johnson, 11 March 1968, National Security File, Memos to the Presi-
dent (Rostow), Box 30, LBJL.
101. Hobart Rowen, “Gold, Dollar Threats Affecting War Policy,” Washington Post, 24
March 1968; Edwin L. Dale Jr., “The Gold Rush,” New Republic, 23 March 1968.
102. Clifford, Counsel to the President, 498.
103. “Notes of the President’s Meeting with His Foreign Advisers at The Tuesday Lun-
cheon,” 19 March 1968, Tom Johnson’s Notes of Meetings, Box 2, LBJL.
104. Mike Mansfield, “Reports of Requests for an Additional 200,000 Men in Vietnam,”
memo, 13 March 1968, National Security File, Meeting Notes File, Box 2, LBJL.
105. Quoted from Larry Berman, Lyndon Johnson’s War: The Road to Stalemate in Vietnam
(New York, 1989), 193.
106. Dean Acheson, “Confidential Memorandum: DA’s Views Regarding Vietnam as of
March 26, 1968 (As expressed at the State Department and White House on March
26, 1968),” Series IV, Box 67, Dean Acheson Papers, Yale University Library, New
Haven, Connecticut.
107. Dean Acheson to John Cowles, 14 March 1968, Box 88, ibid.
108. Clifford, Counsel to the President, 518.
109. Johnson, Vantage Point, 406.
110. A first-rate scholarly account of the Tet decisions is David M. Barrett, Uncertain War-
riors: Lyndon Johnson and His Vietnam Advisers (Lawrence, Kans., 1993), ch. 4. Detailed,
firsthand accounts include Johnson, Vantage Point, ch. 17; and Clifford, Counsel to the
President, chs. 27–28.
111. “Notes of the President’s Meeting with General Earle Wheeler, JCS, and General
Creighton Abrams,” 26 March 1968, Tom Johnson’s Notes of Meetings, Box 2, LBJL.
112. Ibid.
113. Ibid.
114. A limited reserve call-up of twenty thousand men took place shortly thereafter, in May
1968. Stanley Resor OHM, p. 19, LBJL. Resor was secretary of the army from 1968 to 1971.
115. This interpretation appears fleetingly in David Halberstam, The Best and the Brightest
(New York, 1971), 604, but scholars have since pursued at least four other emphases
260 > Notes
in explaining the March 1968 decision to deescalate. Don Oberdorfer, Tet (Garden
City, N.Y., 1971), views the policy shift as the inevitable, or at least predictable, result
of the shock generated by the Tet Offensive. Several studies emphasize the palace
revolt of a handful of administration doves led by Clark Clifford. See Townsend
Hoopes, The Limits of Intervention (New York, 1969), and Herbert Y. Schandler, The
Unmaking of a President: Lyndon Johnson and Vietnam (Princeton, 1977). The signifi-
cance of the defection of the so-called Establishment is stressed in Walter Isaacson
and Evan Thomas, The Wise Men: Six Friends and the World They Made (New York,
1986). The impact of the antiwar movement has been emphasized in Melvin Small,
Johnson, Nixon, and the Doves (New Brunswick, N.J., 1988), 129–32; Tom Wells, The
War Within: America’s Battle Over Vietnam, 4, 261; and Tom Hayden, Reunion: A Mem-
oir, 501. There are elements of truth in all of these competing interpretations, but to
the extent that they neglect the dimension of political economy presently under dis-
cussion, their explanatory power falls short. The most complete and compelling
account to date is Lloyd Gardner, “Lyndon Johnson and Vietnam: The Final
Months,” in The Johnson Years, Volume Three: LBJ at Home and Abroad, ed. Robert A.
Divine (Lawrence, Kans., 1994), 198–238. Halberstam notes correctly that the war
never cost more than 3.5 percent of GNP, and concludes that it was not the war but
rather “the essentially dishonest way in which it was handled” that “destroyed the
economy” (610). The present chapter seeks to establish what other influences and
problems, in addition to duplicity, were at work in the political economy of the war.
116. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1968–69, 1:404.
117. Daniel Patrick Moynihan, Maximum Feasible Misunderstanding (New York, 1969);
Wilbur Cohen OHM, Tape 3, p. 10 end Tape 4, pp. 5, 9.
118. See, for example, “Notes on Meeting of the President with Senator Robert Kennedy,
April 3, 1968,” and “Memorandum of Conversation: The President, Senator Robert
F. Kennedy, Theodore Sorensen, Charles Murphy, and W. W. Rostow, 10:00 a.m.,
April 3, 1968,” both in Diary Backup, Box 94, LBJL.
119. “Notes of the President’s Meeting with Lyle Denniston, Bob Walters, and Jack
Horner of the Washington Evening Star,” 15 November 1967, Tom Johnson’s Notes
of Meetings, Box 1, LBJL.
120. Califano, Triumph and Tragedy of Lyndon Johnson, 258; U.S. Presidents, Public Papers,
Lyndon B. Johnson, 1968–69, 1:46–53, 248–63, 509–10.
121. U.S. Presidents, Public Papers, Lyndon B. Johnson, 1967, 2:733–40; Cabinet Meeting
Minutes, 20 November 1967, Cabinet Papers, Box 11, LBJL.
122. Joe Califano to Johnson, 20 November 1967, Cabinet Papers, Box 11, LBJL.
123. Cabinet Meeting Minutes, 6 December 1967, Cabinet Papers, Box 12, LBJL. See also
Sargent Shriver to Johnson, 22 December 1967, Aides Files, Califano, Box 8, LBJL.
On Johnson’s backing and filling at this point, see also Califano, Triumph and Tragedy
of Lyndon Johnson, 255–56.
124. Quoted from “The Monetary System Buys Some More Time,” Business Week, 23
March 1968, 30.
125. Cabinet Meeting Minutes, 1 May 1968, Cabinet Papers, Box 13, LBJL.
Notes > 261
126. Report of the National Advisory Commission on Civil Disorders (New York, 1968), passim;
New York Times, 2 March 1968, 15; Cabinet Meeting Minutes, 13 March 1968, Cabinet
Papers, Box 13, LBJL.
127. Califano, Triumph and Tragedy of Lyndon Johnson, 261.
128. “Notes on Meeting with Negro Editors and Publishers,” 15 March 1968, Diary
Backup, Box 93, LBJL; Johnson, Vantage Point, 173.
129. George Meany to Johnson, 29 December 1967, Aides Files, Califano, Box 8, LBJL; Joe
Califano to Johnson, 28 March 1968, Box 16, ibid. See also Victor Riesel, “Inside
Labor: Inside the White House: Labor Chiefs Warn LBJ: Budget Slash Plays Into
Hands of Kennedy and McCarthy,” syndicated column dated 16 May 1968, in Box 17,
ibid.
130. Joe Califano to Johnson, 29 May 1968, Aides Files, Califano, Box 17, LBJL.
131. Joe Califano to Johnson, 3 April 1968, ibid.
132. Barefoot Sanders to Johnson, 5 April 1968, Diary Backup, Box 95, LBJL.
133. Joe Califano to Johnson, 10 April 1968, Aides Files, Califano, Box 16, LBJL.
134. Califano, Triumph and Tragedy of Lyndon Johnson, 282–83.
135. Johnson, Vantage Point, 451.
136. Arthur Okun to Johnson, 27 April 1968, Diary Backup, Box 97, LBJL.
137. Joe Califano to Johnson, 20 May 1968, Aides Files, Califano, Box 54, LBJL.
138. Johnson, Vantage Point, 453.
139. Minutes of Special Cabinet Meeting, 14 May 1968, Cabinet Papers, Box 13, LBJL.
140. Wilbur Mills, Remarks to Little Rock Rotary Club, 29 August 1968, Box 420, Mills
Papers.
141. Califano, Triumph and Tragedy of Lyndon Johnson, 288.
142. Sar A. Levitan and Robert Taggart, The Promise of Greatness (Cambridge, Mass.,
1976), 21.
143. Irwin Unger and Debi Unger, America in the 1960s (St. James, N.Y., 1993), 45.
Chapter 4
1. Seymour Martin Lipset and William Schneider, The Confidence Gap: Business, Labor,
and Government in the Public Mind (New York, 1983).
2. U.S. Presidents, Public Papers, Richard Nixon, 1970, 8–16.
3. Earth Day—The Beginning: A Guide for Survival Compiled and Edited by the National Staff
of Environmental Action (New York, 1970), unnumbered page.
4. Garrett DeBell, ed., The Environmental Handbook: Prepared for the First National Envi-
ronmental Teach-In (New York, 1970), 328, 318.
5. Earth Day—The Beginning, 91.
6. William Nordhaus and James Tobin, “Is Growth Obsolete,” in National Bureau of
Economic Research, Economic Growth: Fiftieth Anniversary Colloquim V (New York,
1972), 1.
7. U.S. Presidents, Public Papers, Jimmy Carter, 1979, 2:1238.
8. Washington Post, 25 March 1973; Stephen Ambrose, Nixon: Ruin and Recovery,
1973–1990 (New York, 1991), 94.
262 > Notes
28. Quoted in James Reston, The Lone Star: The Life of John Connally (New York, 1989),
394.
29. John Connally, In History’s Shadow: An American Odyssey (New York, 1993), 233. On
Connally’s governorship, see ibid., 217–33 and Reston, Lone Star, 291.
30. H. R. Haldeman, The Haldeman Diaries: Inside the Nixon White House (New York,
1994), 444.
31. Ibid., 397, 444, 546–47; Nixon, RN, 769; Reston, Lone Star, 459; and Herbert Parmet,
Richard Nixon and His America (Boston, 1990), 616–17.
32. Kissinger, White House Years, 57.
33. Quoted in ibid., 952.
34. U.S. Presidents, Public Papers, Richard Nixon, 1969, 19. See Laurence W. Martin,
“Military Issues: Strategic Parity and Its Implications,” in Robert E. Osgood
et al., Retreat from Empire: The First Nixon Administration (Baltimore, 1973),
137–71.
35. Statistics in Reichley, Conservatives in an Age of Change, 347. See also Lawrence J. Korb,
The Fall and Rise of the Pentagon: American Defense Policies in the 1970s (Westport,
Conn., 1979); and John M. Collins, American and Soviet Military Trends: Since the Cuban
Missle Crisis (Washington, D.C., 1978).
36. U.S. Presidents, Public Papers, Richard Nixon, 1970, 9.
37. Robert E. Osgood, “Introduction: The Nixon Doctrine and Strategy,” in Osgood et
al., Retreat from Empire, 3.
38. Kissinger, White House Years, 136, 130.
39. John Lewis Gaddis, Strategies of Containment: A Critical Appraisal of Postwar American
National Security Policy (New York, 1982), 292–97.
40. Quoted in Henry Brandon, The Retreat of American Power (Garden City, N.Y., 1973),
82.
41. Henry Kissinger, “Central Issues in American Foreign Policy,” in Agenda for the
Nation, ed. Kermit Gordon (Washington 1968), 74.
42. Walter Russell Mead, Mortal Splendor: The American Empire in Transition (Boston,
1987), 53. For concurring views from Britain, see Stephen Barber, America in Retreat
(New York, 1971), and Brandon, Retreat of American Power.
43. Nixon, RN, 353, 352.
44. Theodore White, The Making of the President, 1972 (New York, 1973), 358.
45. Quoted in “Nixon Goal: A Leaner but Stronger Government,” National Journal, 16
December 1972, 1911.
46. U.S. Presidents, Public Papers, Richard Nixon, 1969, 644.
47. Timothy Conlan, New Federalism: Intergovernmental Reform from Nixon to Reagan
(Washington, D.C., 1988), 81–83.
48. See, for example, Wicker, One of Us; and Joan Hoff, Nixon Reconsidered (New York,
1994).
49. Conlan, New Federalism, 20, 19.
50. Nixon’s handwritten notes for the 6 July 1971 briefing are in President’s Personal
Files, Box 67, NPM. Quotes are from U.S. Presidents, Public Papers, Richard Nixon,
1971, 802–13. The briefing is discussed in Hoff, Nixon Reconsidered, 158–59, 164–65; and
264 > Notes
John B. Judis, Grand Illusion: Critics and Champions of the American Century (New York,
1992), 210–13.
51. U.S. Presidents, Public Papers, Richard Nixon, 1971, 802–13.
52. Ibid., 890.
53. U.S. Presidents, Public Papers, Richard Nixon, 1969, 1; Paul McCracken to Nixon, 17
November 1969, WHCF:SMOF:McCracken:Box 91, NPM.
54. CEA to Cabinet Committee on Economic Policy, 8 November 1969, WHCF:SMOF:
McCracken:Box 2, NPM.
55. U.S. Presidents, The Economic Report of the President, February, 1970, ch. 3, “Uses of the
National Output.”
56. William Safire to Nixon, 19 June 1969, White House Special Files:Central Files:BE
Business/Economics, Box 2, NPM.
57. Quoted in Stephen Ambrose, Nixon: The Triumph of a Politician, 1962–1972 (New York,
1989), 297.
58. Murray Weidenbaum to Donald Webster, 26 June 1969, WHCF:SMOF: McCracken:
Box 91, NPM.
59. Herbert Stein to McCracken, WHCF:SMOF:Stein:Box 1, NPM.
60. Stein [as acting CEA Chair] to Nixon, 1 July 1969, WHCF:SMOF:McCracken:Box 91,
NPM.
61. McCracken, “Notes: Remarks at Cabinet Meeting, March 20, 1969,” handwritten,
WHCF:SMOF:McCracken:Box 1, NPM.
62. U.S. Congress, Joint Economic Committee, The 1969 Economic Report of the President,
Hearings, before the Joint Economic Committee, 91st Cong., 1st sess., pt. 2, 284–304.
63. Statistics in Wyatt C. Wells, Economist in an Uncertain World: Arthur F. Burns and the
Federal Reserve, 1970–78 (New York, 1994), 35. On gradualism, see F. Gerard Adams,
“The Economic Road from Johnson to Nixon,” Wheaton Quarterly (Summer 1969):
19–24; Arthur Okun, “Political Economy: Some Lessons of Recent Experience,”
Journal of Money, Credit, and Banking 4 (February 1972): 23–39; Stein, Presidential Eco-
nomics, ch. 5; Reichley, Conservatives in an Age of Change, 205–17; and Neil De Marchi,
“The First Nixon Administration: Prelude to Controls,” in Exhortation and Controls:
The Search for a Wage-Price Policy, 1945–1971 (Washington, D.C., 1975), 295–352.
64. Herbert Stein, On the Other Hand . . . : Essays on Economics, Economists, and Politics
(Washington, D.C., 1995), 65.
65. Richard Nixon, Six Crises (Garden City, N.Y., 1962), 309–11.
66. Nixon quoted in Joanne S. Gowa, Closing the Gold Window: Domestic Politics and the
End of Bretton Woods (Ithaca, N.Y., 1983), 166; and in John Ehrlichman, Witness to
Power: The Nixon Years (New York, 1982), 254.
67. Moynihan quoted in Thompson, ed., The Nixon Presidency, 52.
68. McCracken, “Notes for Quadriad Meeting, 15 December 1969,” WHCF:SMOF:
McCracken: Box 2, NPM.
69. McCracken to Nixon, 17 February 1970, and McCracken, “Cabinet Meeting, 18 May
1970” [handwritten notes], both WHCF:SMOF:McCracken:Box 1, NPM; “[Hand-
written] Notes of Meeting with the President, 2 July 1970 (San Clemente)”
WHCF:SMOF:Ehrlichman:Box 4, NPM.
Notes > 265
Federal Reserve,” Fortune, July 1974, 90ff.; and Edward R. Tufte, Political Control of the
Economy (Princeton, N.J., 1978). Kettl, Leadership at the Fed, ch. 5, and Wells, Econo-
mists in an Uncertain World, ch. 5, defend monetary policy in 1972 from the charge.
Stein defends fiscal policy in Presidential Economics, 183–85. Samuelson is quoted in
Lester A. Sobel, ed., Inflation and the Nixon Administration, Volume 2, 1972–74 (New
York, 1975), 45.
124. Stein to Nixon, 28 February 1972, WHCF:SMOF:Stein:Box 45, NPM; Friedman to
Stein, 16 March 1972, WHCF:SMOF:Stein:Box 20, NPM; Shultz to Nixon, 18 April
1972, President’s Personal Files, Box 15, NPM; Stein to Nixon, 3 April 1972,
WHCF:SMOF:Stein:Box 45, NPM; Stein, Presidential Economics, 185.
125. Robert J. Gordon, “Postwar Macroeconomics: The Evolution of Events and Ideas,”
in The American Economy in Transition, ed. Martin Feldstein (Chicago, 1980), 151.
126. Stein to Nixon, 5 December 1973, WHCF:SMOF:Stein:Box 46, NPM; Stein, “The
Economy in the State of the Union Message,” n.d., WHCF:SMOF:Stein:Box 2, NPM.
127. U.S. Presidents, Public Papers, Richard Nixon, 1974, 455, 608.
128. U.S. Presidents, Public Papers, Richard Nixon, 1973, 697; Ambrose, Nixon: Ruin and
Recovery, 154; Henry Kissinger, Years of Upheaval (Boston, 1982), 105.
129. Ambrose, Nixon: Ruin and Recovery, 755, 279, 289.
130. Kissinger, Years of Upheaval, 1195–96.
131. Raymond Price, With Nixon (New York, 1977), 369.
132. Otto Eckstein, The Great Recession: With a Postscript on Stagflation (Amsterdam, 1978),
109. On the harmful effects of the NEP’s controls, see Blinder, Great Stagflation, ch. 6.
133. Angus Maddison, The World Economy in the 20th Century (Paris, 1989), 65. The discus-
sion that follows is based on Maddison and W. W. Rostow, The Barbaric Counter-Revo-
lution: Cause and Cure (Austin, Tex., 1983), passim.
134. John E. Schwarz, America’s Hidden Success: A Reassessment of Public Policy from Kennedy
to Reagan, rev. ed. (New York, 1988), 116–32.
135. Edwin Mansfield, “Technology and Productivity in the United States,” in American
Economy in Transition, ed. Feldstein, 564–68.
136. On imports, see Bennett Harrison and Barry Bluestone, The Great U-Turn: Corporate
Restructuring and the Polarizing of America (New York, 1988), 8–9. On exports, see
William H. Branson, “Trends in United States International Trade and Investment
since World War II,” in American Economy in Transition, ed. Feldstein, 195–203.
Chapter 5
1. John Kenneth Galbraith, The Affluent Society (New York, 1958), 156.
2. Martin J. Wiener, English Culture and the Decline of the Industrial Spirit, 1850–1980 (New
York, 1981).
3. Ezra J. Mishan, The Costs of Economic Growth (New York, 1967), xii, 171.
4. Ibid., 161, 166; Peter Laslett, The World We Have Lost: England Before the Industrial Age
(New York, 1965), 22; E. F. Schumacher, Small Is Beautiful: Economics as if People Mat-
tered (New York, 1973), 21, 57, 8.
5. Theodore Roszak, The Making of a Counter Culture: Reflections on the Technocratic Soci-
ety and Its Youthful Opposition (Garden City, N.Y., 1969).
268 > Notes
6. Guy Strait, “What Is a Hippie?” in “Takin’ It to the Streets”: A Sixties Reader, ed.
Alexander Bloom and Wini Breines (New York, 1995), 312.
7. Schumacher, Small Is Beautiful, 297.
8. David Shi, The Simple Life: Plain Living and High Thinking in American Culture (New
York, 1985), 269–70.
9. Ronald Inglehart, The Silent Revolution: Changing Values and Political Styles Among West-
ern Publics (Princeton, N.J., 1977), 3; David Riesman et al., The Lonely Crowd: A Study of
the Changing American Character, abridged ed. with a 1969 preface (New Haven, Conn.,
1989), xvi; Daniel Bell, The Cultural Contradictions of Capitalism (New York, 1976), 7, 37.
10. Riesman, Lonely Crowd, 250, 304.
11. Robert N. Bellah et al., Habits of the Heart: Individualism and Commitment in American
Life (Berkeley, 1985), 49.
12. Charles A. Reich, The Greening of America (New York, 1970); Peter Clecak, America’s
Quest for the Ideal Self: Dissent and Fulfillment in the 60s and 70s (New York, 1983), 7;
Tom Wolfe, “The `Me’ Decade and the Third Great Awakening,” New York, 23
August 1976, 26–40; Peter Marin, “The New Narcissism,” Harper’s, October 1975,
45–56; Christopher Lasch, The Culture of Narcissism: American Life in an Age of Dimin-
ishing Expectations (New York, 1978); Daniel Yankelovich, New Rules: Searching for Self-
Fulfillment in a World Turned Upside Down (New York, 1981).
13. A superior overview of the shift from conservation to environmentalism is Samuel P.
Hays, “Three Decades of Environmental Politics: The Historical Context,” in Govern-
ment and Environmental Politics: Essays on Historical Developments Since World War Two,
ed. Michael Lacey (Baltimore, 1989), 19–79. Hays argues that, contrary to the popular
stereotype, the emergent environmental movement was favorably disposed toward
modern science and technology. That may (or may not) be true, but the attitude of
environmentalists toward economic growth per se was consistently negative.
14. Rachel Carson, Silent Spring (Boston, 1962); John C. Whitaker, Striking a Balance:
Environment and Natural Resources Policy in the Nixon-Ford Years (Washington, D.C.,
1976), 264.
15. Hazel Erskine, “The Polls: Pollution and Its Costs,” Public Opinion Quarterly (Spring
1970): 120–21.
16. New York Times, 16 January 1972.
17. Robert Cameron Mitchell, “From Conservation to Environmental Movement: The
Development of the Modern Environmental Lobbies,” in Government and Environ-
mental Politics, ed. Lacey, 96.
18. U.S. Presidents, Public Papers, Richard Nixon, 1970, 12.
19. John Maddox, The Doomsday Syndrome (New York, 1973), 10. See also William Tucker,
Progress and Privilege: America in the Age of Environmentalism (New York, 1982); and
Mary Douglas and Aaron Wildavsky, Risk and Culture: An Essay on the Selection of
Technical and Environmental Dangers (Berkeley, Calif., 1982).
20. Todd R. LaPorte and Daniel Metlay, “Technology Observed: Attitudes of a Wary
Public,” Science, 11 April 1975, 121–27.
21. Barry Commoner, Closing the Circle: Nature, Man, and Technology (New York, 1971),
141, 265, 268, 270.
Notes > 269
22. Kenneth E. Boulding, “The Economics of the Coming Spaceship Earth,” in Environ-
mental Quality in a Growing Economy, ed. Henry Jarrett (Baltimore, 1966); Linda Han-
ley, “Ain’t No Time to Wonder Why . . . Whoopie! We’re All Gonna Die,” in Student
Voices/One, ed. Christopher R. Reaske and Robert F. Wilson Jr. (New York, 1971), 83.
23. “A Blueprint for Survival,” The Ecologist, January 1972, 1.
24. Time, 24 January 1972, 32.
25. Bowen Northrup, “Club of Rome—75 Powerful Men Who Want to Save the
World,” Science Digest, April 1973, 22–26; and John McCormick, Reclaiming Paradise:
The Global Environmental Movement (Bloomington, Ind., 1989), ch. 4.
26. Donella Meadows et al., The Limits to Growth: A Report for the Club of Rome’s Project on
the Predicament of Mankind (New York, 1972), 142, 145.
27. Ibid., 168–69.
28. Ibid., 29.
29. On the mass-marketing of Limits, see Robert Gillette, “The Limits to Growth: Hard
Sell for a Computer View of Doomsday,” Science, 10 March 1972, 1088–92. The publi-
cation statistic is from McCormick, Reclaiming Paradise, 82. Peccei is quoted in
Willem L. Oltmans, ed., On Growth (New York, 1974), 472.
30. Paul Verghese, “Develop—But Don’t Grow!” Christian Century, 6 June 1973, 653;
George J. Church, “Can the World Survive Economic Growth?” Time, 14 August
1972, 56–57; Boulding quoted in Mancur Olson, “Introduction,” Daedalus (Fall 1973):
3. The Daedalus issue is devoted to discussion of the limits to growth issue and is a
good source of commentary.
31. The critical literature on the debate surrounding The Limits to Growth is vast. A repre-
sentative sample includes McCormick, Reclaiming Paradise, ch. 4; Francis Sandbach,
“The Rise and Fall of the Limits to Growth Debate,” Social Studies of Science (1978):
495–520; H.S.D. Cole et al., eds., Thinking About the Future: A Critique of “The Limits to
Growth” (London, 1973); Business Week, 11 March 1972, 97–98; Kenneth E. Boulding,
“Yes, the Wolf Is Real,” New Republic, 29 April 1974, 27–28; Stuart Chase, “The Club of
Rome and Its Computer,” Bulletin of the Atomic Scientists, March 1973, 36–39.
32. Carl Kaysen, “The Computer That Printed Out W*O*L*F*,” Foreign Affairs, July
1972, 665.
33. Christopher Freeman, “Malthus with a Computer,” in Thinking About the Future, ed.
Cole et al., 8.
34. Henry C. Wallich, “More on Growth,” Newsweek, 13 March 1972, 86.
35. Henry Simmons, “Systems Dynamics and Technocracy,” in Thinking About the
Future, ed. Cole et al., 192–208. The quoted material is from 207.
36. Quoted in Maurice Goldsmith, “Meadows Unlimited or Caveat Computer,” Bulletin
of the Atomic Scientists, May 1973, 18.
37. Quoted in Oltmans, ed., On Growth, 472; Business Week, 11 March 1972, 98.
38. Leonard Silk, “On the Imminence of Disaster,” New York Times, 14 March 1972.
39. Quoted in Oltmans, ed., On Growth, 48.
40. Walt W. Rostow, “Economic Growth: Past and Future,” in Growth in America, ed.
Chester Cooper (Westport, Conn., 1976), 50.
41. U.S. Presidents, Public Papers, Richard Nixon, 1973, 93, 102.
270 > Notes
102. The Harris Survey, 23 May 1977, White House Conference, Box 19, JCPL.
103. Yankelovich and Lefkowitz, “Public Debate on Growth,” 29, Commission for a
National Agenda, Box 13, JCPL.
104. White House Conference transcript, 30 January 1978, 48, White House Conference,
Box 22, JCPL.
105. Hedley Donovan, Roosevelt to Reagan: A Reporter’s Encounters with Nine Presidents
(New York, 1985), 201–2.
106. See the superb account in Edward D. Berkowitz, “Jimmy Carter and the Sunbelt
Report: Seeking a National Agenda,” in Presidency and Domestic Policies of Jimmy
Carter, ed. Rosenbaum and Ugrinsky, 33–44.
107. U.S. President’s Commission for a National Agenda for the Eighties, A National
Agenda for the Eighties, reprint (Englewood Cliffs, N.J., 1980), 1, 127–28.
108. “Executive Summary, Panel 2, The American Economy,” ibid., 146–47.
109. “Executive Summary, Panel 8, The Quality of American Life,” ibid., 189, 191.
110. Ibid., 22.
111. Amitai Etzioni, “America’s Project,” n.d. [1979], Box 7, Commission for a National
Agenda, Box 7, JCPL.
Chapter 6
1. Hawkins quoted in Harvey L. Schantz and Richard H. Schmidt, “Politics and Policy:
The Humphrey-Hawkins Story,” in Employment and Labor-Relations Policy, ed.
Charles Bulmer and John L. Carmichael Jr. (Lexington, Mass., 1980), 27; Wyatt C.
Wells, Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970–78
(New York, 1994), 244.
2. “A Job for Everyone,” New Republic, 27 March 1976, 4; Keyserling letter to the editor,
New Republic, 1 May 1976; and Keyserling, “Memorandum In Re: Status of
Humphrey-Hawkins Bill,” 29 January 1976, Box 34, Keyserling MSS, HSTL. Regard-
ing Keyserling’s vigorous behind-the-scenes lobbying on behalf of Humphrey-
Hawkins, see his correspondence with Walter Heller, Paul Samuelson, and George
Schultze in Box 33, ibid.
3. Schantz and Schmidt, “Politics and Policy: The Humphrey-Hawkins Story,” 25–39;
Gary Mucciaroni, The Political Failure of Employment Policy, 1945–1982 (Pittsburgh, Pa.,
1990), 93–102; American Enterprise Institute, Reducing Unemployment: The Humphrey-
Hawkins and Kemp-McClure Bills (Washington, D.C., 1976), 1–20.
4. Keyserling quoted in American Enterprise Institute, Reducing Unemployment, 15.
5. Keyserling, “Irresponsible Economics Under President Nixon and Areas of Democratic
Responsibility: Presentation to H.R. Democratic Steering and Policy Committee,”
18 June 1974, Box 32, Keyserling MSS, HSTL.
6. Ibid.
7. Milton Friedman, “Humphrey-Hawkins,” Newsweek, 2 August 1976, 55.
8. Schultze quoted in Mucciaroni, Political Failure of Employment Policy, 97.
9. Quoted in A. James Reichley, Conservatives in an Age of Change: The Nixon and Ford
Administrations (Washington, D.C., 1981), 398.
10. Quoted in American Enterprise Institute, Reducing Unemployment, 15–16.
274 > Notes
11. “Economics and Morality: An Interview with Leon H. Keyserling,” Skeptic: The
Forum for Contemporary History, special issue number 6, 1975, 49.
12. Quoted in American Enterprise Institute, Reducing Unemployment, 16.
13. Quoted in Schantz and Schmidt, “Politics and Policy: The Humphrey-Hawkins
Story,” 36.
14. Keyserling, “What’s Wrong with American Economics?” lecture, 9 October 1986,
Box 39, Keyserling MSS, HSTL.
15. The best account of the American flirtation with industrial policy is Otis L. Graham
Jr., Losing Time: The Industrial Policy Debate (Cambridge, Mass., 1992).
16. Forging America’s Future: Strategies for National Growth and Development, Report of the
Advisory Committee on National Growth Policy Processes to the National Commission on
Supplies and Shortages (Washington, 1976), passim.
17. Richard H. K. Vietor, Contrived Competition: Regulation and Deregulation in America
(Cambridge, Mass., 1994), 14–15.
18. Graham, Losing Time, 38–45. Eizenstat is quoted on 43.
19. Ibid., 44, 53.
20. “The Reindustrialization of America,” Business Week, 30 June 1980, 86, 88.
21. Quoted in David E. Rosenbaum, “A Passion for Ideas,” New York Times, 11 August 1996, 13.
22. Jack Kemp, An American Renaissance: A Strategy for the 1980s (New York, 1979), 49, 185.
23. Ibid., 49.
24. American Enterprise Institute, Reducing Unemployment, 21–23, 25–26.
25. Keyserling, “Comments on H.R. 13399 Kemp-McClure Bill (“Jobs Creation Act”), 14
September 1976, Box 34, Keyserling MSS, HSTL.
26. Paul Craig Roberts, The Supply-Side Revolution: An Insider’s Account of Policymaking in
Washington (Cambridge, Mass., 1984), 30–31; Kemp, American Renaissance, 37–39.
27. Kemp’s speech to the 1976 Republican Convention is reprinted in Bruce R. Bartlett,
Reaganomics: Supply Side Economics in Action (Westport, Conn., 1981), 219.
28. Ibid., 130.
29. Heller quoted in Robert L. Bartley, The Seven Fat Years and How to Do It Again (New
York, 1992), 74; other quotations from Congress of the United States, Committee on
the Budget, House of Representatives and Senate Budget Committee, United States
Senate, Leading Economists’ Views of Kemp-Roth, Joint Committee Print, 95th Cong.,
2nd sess. (Washington, D.C., 1978), 13, 11, 123, 49, 45.
30. Congress of the United States, Committee on Ways and Means, U.S. House of Rep-
resentatives, Tax Reductions: Economists’ Comments on H.R. 8333 and S. 1860, Bills to Pro-
vide for Permanent Tax Rate Reductions for Individuals and Businesses, Committee Print,
95th Cong., 2nd sess. (Washington, D.C., 1978), 28, 59.
31. Ibid., 44, 86, 68.
32. Committee on the Budget, Leading Economists’ Views of Kemp-Roth, 91.
33. Kemp, American Renaissance, 10; Bartlett, Reaganomics, 132, 144–45.
34. Bartlett, Reaganomics, 150–58. Quoted material from 153. Regarding the considerable
political muscle put into the struggle to cut the capital gains tax, see Godfrey Hodg-
son, The World Turned Right Side Up: A History of the Conservative Ascendancy in Amer-
ica (Boston, 1996), 206–9.
Notes > 275
35. The discussion that follows relies heavily on Paul Krugman’s brilliant analysis in Ped-
dling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations
(New York, 1994), 23–81. Different slants on the same phenomenon are found in
James W. Dean, “The Dissolution of the Keynesian Consensus,” in The Crisis in Eco-
nomic Theory, ed. Daniel Bell and Irving Kristol (New York, 1981), 19–34; Robert Heil-
broner and William Milberg, The Crisis of Vision in Modern Economic Thought (New
York, 1995), 25–67; and Gregory Mankiw, “A Quick Refresher Course in Macroeco-
nomics,” Journal of Economic Literature 28 (December 1990): 1645–60.
36. A. W. Phillips, “The Relation Between Unemployment and the Rate of Change of
Money Wage Rates in the United Kingdom, 1861–1957,” Economica 25 (November
1958): 283–99; Paul Samuelson and Robert Solow, “Analytical Aspects of Anti-Infla-
tion Policy,” American Economic Review 50 (May 1960): 177–94.
37. Milton Friedman, “The Role of Monetary Policy,” American Economic Review 58
(March 1968): 1–17. James Tobin, “The Natural Rate as New Classical Macroeconom-
ics,” in The Natural Rate of Unemployment: Reflections on 25 Years of the Hypothesis, ed.
Rod Cross (New York, 1995), 40.
38. Friedman, “Role of Monetary Policy,” 11.
39. Mark H. Willis, “`Rational Expectations’ as a Counterrevolution,” in Crisis in Eco-
nomic Theory, ed. Bell and Kristol, 81. Seminal expressions of the rational expecta-
tions approach are John F. Muth, “Rational Expectations and the Theory of Price
Movements,” Econometrica 29 ( July 1961): 315–35; Robert E. Lucas Jr., “Expectations
and the Neutrality of Money,” Journal of Economic Theory 4 (April 1972): 102–24; and
Thomas J. Sargent, “Rational Expectations, the Real Rate of Interest and the Natural
Rate of Unemployment,” Brookings Papers on Economic Activity 2 (1973): 429–72.
40. Franco Modigliani, “The Monetarist Controversy, or Should We Forsake Stabiliza-
tion Policies?” American Economic Review 67 (March 1977): 5.
41. Krugman, Peddling Prosperity, 72. See, for example, the essays by Feldstein, Summers,
and Boskin in Martin S. Feldstein, ed., Taxes and Capital Formation (Chicago, 1987).
42. Alan S. Blinder, “The Rise and Fall of Keynesian Economics,” The Economic Record
(December 1988): 278.
43. Robert Lucas, “Tobin and Monetarism: A Review Article,” Journal of Economic Litera-
ture 19 ( June 1981): 559.
44. Quoted in William R. Neikirk, Volcker: Portrait of the Money Man (New York, 1987), 78.
45. William A. Niskanen, Reaganomics: An Insider’s Account of the Policies and the People
(New York, 1988), 19.
46. This distillation of supply-side doctrine is based on Roberts, Supply-Side Revolution;
Bartley, Seven Fat Years; Michael K. Evans, The Truth About Supply-Side Economics
(New York, 1983); and Herbert Stein, “Some `Supply-Side’ Propositions,” Wall Street
Journal, 19 March 1980.
47. Jude Wanniski, The Way the World Works, 3rd ed. (Morristown, N.J., 1989), 345;
regarding Say’s ideas, see Thomas Sowell, Say’s Law: An Historical Analysis (Prince-
ton, N.J., 1972); Ture quoted in Bartley, Seven Fat Years, 56–57.
48. Victor A. Canto, Douglas H. Joines, and Arthur B. Laffer, Foundations of Supply-Side
Economics: Theory and Evidence (New York, 1983), xv.
276 > Notes
49. Martin Anderson, Revolution (New York, 1988), 147. On the creation of the Laffer
curve, see Bartley, Seven Fat Years, 57–58. The role of Laffer and Mundell is sketched
acerbicly but compellingly in Krugman, Peddling Prosperity, ch. 3. See also Jude
Wanneski, “The Mundell-Laffer Hypothesis—A New View of the World Economy,”
The Public Interest 39 (Spring 1975): 31–52.
50. Robert Bartley, “Jack Kemp’s Intellectual Blitz,” Wall Street Journal, 29 November
1979; Roberts, Supply-Side Revolution, 7–33.
51. Herbert Stein, Presidential Economics: The Making of Economic Policy from Roosevelt to
Reagan and Beyond (New York, 1984), 241. Robert Bartley, “Introduction to the Third
Edition,” in Wanniski, Way the World Works, xii.
52. Herbert Stein, “Some ‘Supply-Side’ Propositions,” Wall Street Journal, 19 March 1980;
Stein, “My Life as a Dee-cline,” in On the Other Hand: Essays on Economics, Economists, and
Politics (Washington, D.C., 1995), 18; Stein, “Changes in Macroeconomic Conditions,” in
The American Economy in Transition, ed. Martin Feldstein (Chicago, 1980), 172–73.
53. Krugman, Peddling Prosperity, 89–92.
54. Robert Bartley, “Introduction to the Third Edition,” in Wanniski, Way the World
Works, xii.
55. Irving Kristol, Neoconservatism: The Autobiography of an Idea (New York, 1995), 36–37.
56. Herbert Stein, “Professor Knight’s Law of Talk,” Wall Street Journal, 14 October 1981.
57. Roberts, Supply-Side Revolution, 28; Niskanen, Reaganomics, 19.
58. Quoted in Haynes Johnson, Sleepwalking Through History: America in the Reagan Years,
updated ed. (New York, 1992), 107.
59. “Remarks by Chairman Richard Bolling, SSEC Directors Meeting,” 23 March 1978; Memo,
“Special Study on Economic Change,” 1 March 1979; Robert Ash Wallace to Bolling, 25 Jan-
uary 1979; Joint Economic Committee, “Special Study on Economic Change: Committee
Report,” n.d., typescript, all in Box 2, Robert Ash Wallace Papers, JCPL.
60. Congress of the United States, Joint Economic Committee, Joint Economic Committee
Report, 1979, Senate Report No. 96–44, 96th Cong., 1st sess. (Washington, D.C., 1979),
3; Bentsen press release, quoted in Bartley, Seven Fat Years, 87; and Congress of the
United States, Joint Economic Committee, Joint Economic Committee Report, 1980,
Senate Report No. 96–618, 96th Cong., 2nd sess. (Washington, D.C., 1980), 1.
61. Burns quoted in Wells, Economist in an Uncertain World, 163; Anderson, Revolution, 143.
62. Feldstein, “Introduction,” in Feldstein, ed., American Economy in Transition, 6. See
also A. F. Ehrbar, “Martin Feldstein’s Electric-Blue Economic Prescriptions,” Fortune,
27 February 1978, 54–58; and Soma Golden, “Superstar of the New Economists,”
New York Times Magazine, 23 March 1980, 30ff.
63. Quoted in Bartlett, Reaganomics, 8–9.
64. Wanniski, “Introduction to the Revised and Updated Edition,” in Way the World
Works, 345; Daniel Patrick Moynihan, Miles to Go: A Personal History of Social Policy
(Cambridge, Mass., 1996), 10.
65. Kemp, American Renaissance, 10, 13.
66. William Niskanen in Kenneth W. Thompson, ed., Reagan and the Economy: Nine Inti-
mate Perspectives (Lanham, Md., 1994), 30; Richard Darman, Who’s in Control? Polar
Politics and the Sensible Center (New York, 1996), 40.
Notes > 277
67. Lou Cannon, President Reagan: The Role of a Lifetime (New York, 1991), 130; Fred
Barnes, “Nap Master Ronnie,” New Republic, 9 January 1989, 17.
68. O’Neill quoted in Laurence I. Barrett, Gambling with History: Reagan in the White
House, updated ed. (New York, 1984), 82; and Cannon, President Reagan, 116. Wright
quoted in Barrett, Gambling with History, 15.
69. George Will, “How Reagan Changed America,” Newsweek, 9 January 1989; regarding
the famous pony story, see Barrett, Gambling with History, 174; U.S. Presidents, Public
Papers, Ronald Reagan, 1981, 4.
70. Isaiah Berlin, The Hedgehog and the Fox: An Essay on Tolstoy’s View of History, rev. ed.
(Chicago, 1993), 3.
71. Edwin Meese III, With Reagan: The Inside Story (Washington, D.C., 1992), 20. On Rea-
gan’s criteria for selection to the administration team, see 63.
72. Quoted in Dinesh D’Souza, Ronald Reagan: How an Ordinary Man Became an Extraor-
dinary Leader (New York, 1997), 45.
73. Meg Greenfield, “Leadership by Presentation,” Newsweek, 9 March 1998, 68. See also
Michael K. Deaver with Mickey Herskowitz, Behind the Scenes (New York, 1988).
74. Reagan speech to the Republican National Convention, 17 July 1980, in A Time for
Choosing: The Speeches of Ronald Reagan, 1961–1982 (Chicago, 1983), 223, 231, 225; U.S.
Presidents, Public Papers, Ronald Reagan, 1981, 1.
75. Anderson, Revolution, 114–21, 126; “White House Report on the Program for Economic
Recovery, February 18, 1981,” in U.S. Presidents, Public Papers, Ronald Reagan, 1981, 116–32.
76. William Niskanen, William Poole, and Murray Weidenbaum, “Introduction,” in
Two Revolutions in Economic Policy: The First Economic Reports of Presidents Kennedy and
Reagan, ed. James Tobin and Murray Weidenbaum (Cambridge, Mass., 1988), 279.
77. Ronald Reagan, An American Life (New York, 1990), 231; Reagan speech to the
Phoenix, Arizona, Chamber of Commerce, 30 March 1961, in A Time for Choosing.
78. Meese, With Reagan, 123, 121; Reagan, An American Life, 232.
79. Anderson, Revolution, 140–63 (quote from 163).
80. Niskanen, Poole, and Weidenbaum, “Introduction,” 287. On the rejection of “the
simple-minded supply-side approach,” see Weidenbaum’s comments in Thompson,
ed., Reagan and the Economy, 13.
81. Brock quoted in Kenneth W. Thompson, ed., The Reagan Presidency: Ten Intimate Per-
spectives of Ronald Reagan (Lanham, Md., 1997), 114; Kemp quoted in Recollections of
Reagan: A Portrait of Ronald Reagan, ed. Peter Hannaford (New York, 1997), 74; the
Chicago speech is discussed in Anderson, Revolution, 122–139; U.S. Presidents, Public
Papers, Ronald Reagan, 1981, 83.
82. U.S. Presidents, Public Papers, Ronald Reagan, 1984, 2:1174.
83. Reagan, An American Life, 316, 232.
84. Niskanen, Reaganomics, 73–76; Don Fullerton, “Inputs to Tax Policy-Making: The
Supply-Side, the Deficit, and the Level Playing Field,” in American Economic Policy in
the 1980s, ed. Feldstein, 165–85.
85. Meese, With Reagan, 156; Reagan quoted in Daniel Yergin and Joseph Stanislaw, The
Commanding Heights: The Battle Between Government and the Marketplace That Is
Remaking the Modern World (New York, 1998), 334.
278 > Notes
86. Volcker quoted in Neikirk, Volcker: Portrait of the Money Man, 110; Michael Mussa,
“U.S. Monetary Policy in the 1980s,” in American Economic Policy in the 1980s, ed. Feld-
stein, 111.
87. Quoted in James M. Poterba, “Federal Budget Policy in the 1980s” in American Eco-
nomic Policy in the 1980s, ed. Feldstein, 246.
88. Vietor, Contrived Competition, 15–16.
89. Anderson, Revolution, 245; Donald T. Regan, For the Record: From Wall Street to Wash-
ington (San Diego, 1988), 156; David A. Stockman, The Triumph of Politics: Why the
Reagan Revolution Failed (New York, 1986), 271.
90. Joseph White and Aaron Wildavsky, The Deficit and the Public Interest: The Search for
Responsible Budgeting in the 1980s (Berkeley, Calif., 1989), ch. 8.
91. Regarding the Rosy Scenario, the fundamental underpinnings of the revenue hem-
orrhage, and the problem of income tax indexation, see Murray L. Weidenbaum,
Confessions of a One-Armed Economist (St. Louis, 1983), 9–11, 14–18.
92. Stockman, Triumph of Politics, 8, 11; liberal complaints are quoted in D’Souza, Ronald
Reagan, 102; Benjamin Friedman, Day of Reckoning: The Consequences of American Eco-
nomic Policy Under Reagan and After (New York, 1988), 272–73.
93. Stockman, Triumph of Politics, 11; Niskanen, Reaganomics, 39.
94. Stockman, Triumph of Politics, 136–38.
95. Korb quoted in Daniel Patrick Moynihan, Miles to Go, 113; Stockman, Triumph of Pol-
itics, 106, 278, 297; Niskanen, Reaganomics, 33.
96. Stockman, Triumph of Politics, 356; Iwan W. Morgan, Deficit Government: Taxing and
Spending in Modern America (Chicago, 1995), 148–49; Poterba, “Federal Budget Policy
in the 1980s,” 238–39. Experts continue to disagree how much responsibility the Rea-
gan tax cuts bear for the subsequent deficits of the 1980s. Lawrence Lindsay, The
Growth Experiment: How the New Tax Policy is Transforming the U.S. Economy (New
York, 1990), 98, argues that tax reductions account for only a quarter of the rise in
the deficits of the 1980s; Paul Krugman, Peddling Prosperity, 154, estimates that over
70 percent of the increase in the deficit results from tax changes.
97. Carter and Ford joint statement in American Agenda: Report to the Forty-First President
of the United States (n.p., n.d.), 8; White and Wildavsky, The Deficit and the Public Inter-
est, xv; Moynihan, Miles to Go, 95 (quote), 11, 126.
98. Alan Brinkley, “Reagan’s Revenge,” New York Times Magazine, 19 June 1994, 37;
Griscom quote from The Reagan Presidency: Ten Intimate Perspectives, ed. Kenneth W.
Thompson, 43. See also Charles L. Schultze, “Paying the Bills,” in Setting Domestic
Priorities: What Can Government Do?, ed. Henry J. Aaron and Charles L. Schultze
(Washington, D.C., 1992), 295; Theda Skocpol, Boomerang: Clinton’s Health Security
Effort and the Turn Against Government in U.S. Politics (New York, 1996); and Paul Pier-
son, Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment
(New York, 1994), 149–55, 162–64.
99. Daniel Patrick Moynihan, Came the Revolution: Argument in the Reagan Era (San
Diego, 1988), 21, 31, 34 (quote).
100. Ibid., 151, 153.
101. Ibid., 279.
Notes > 279
102. Daniel Patrick Moynihan, Miles to Go, 111, 113, 11. Sidney Blumenthal has since
extended the reach of the conspiracy by analyzing the appearance of the same
“insolvency mechanism” of tax-cutting in the 1996 presidential campaign. See his
“Seeking Insolvency: The Strange Career of Supply-Side Economics,” World Policy
Journal 14 (Summer 1997): 19–29.
103. Stockman’s comments are in “Summary of Discussion,” American Economic Policy in
the 1980s, ed. Feldstein, 287; Darman, Who’s in Control?, 80.
104. Newsweek, 7 August 1967, 68; 23 February 1981, 70. See also Friedman, “The Kemp-
Roth Free Lunch,” Newsweek, 7 August 1978, 59; Elton Rayack, Not So Free to Choose:
The Political Economy of Milton Friedman and Ronald Reagan (New York, 1987), 188–89;
Milton and Rose D. Friedman, Two Lucky People: Memoirs (Chicago, 1998), 388–92;
Jude Wanniski, “The Two Santa Claus Theory,” The National Observer, 6 March 1976;
George Will, “Reining In the Federal Spending Urge,” Washington Post, 27 July 1978.
105. Quotes from Reagan speech to the American Textile Manufacturers Institute, 29
March 1973, in A Time for Choosing, 116, 118.
106. On the Prop 1 struggle and tax limitation movement, see Niskanen, Reaganomics,
viii-ix; William Niskanen, “Organizing the Government for Policy-Making,” in Rea-
gan and the Economy, ed. Thompson, 28; Friedman and Friedman, Two Lucky People,
352–56, 389; Edmund G. Brown and Bill Brown, Reagan: The Political Chameleon (New
York, 1976), 61–67; Alvin Rabushka and Pauline Ryan, The Tax Revolt (Stanford, Calif.,
1982), 18; Clarence Y. H. Lo, Small Property Versus Big Government: Social Origins of the
Property Tax Revolt (Berkeley, Calif., 1990), 1–2, 23.
107. Stockman, Triumph of Politics, 133.
108. U.S. Presidents, Public Papers, Ronald Reagan, 1982, 1:328.
109. U.S. Presidents, Public Papers, Ronald Reagan, 1981, 556–57. (See also 545, 546, 563, 571.)
110. Stockman’s self-characterization is in Stockman, “Budget Policy,” in American Eco-
nomic Policy in the 1980s, ed. Feldstein, 275; Wanniski, “Introduction to the Second
Edition,” in Way the World Works, 360; Meese, With Reagan, 138.
111. Reagan quoted in Darman, Who’s in Control?, 118.
112. U.S. Presidents, Public Papers, Ronald Reagan, 1983, 1:105; Reagan, An American Life,
325.
113. Reagan, For the Record, 327.
114. Stockman, Triumph of Politics, 272.
115. William Greider, The Education of David Stockman and Other Americans (New York,
1982), 100–101.
116. U.S. Presidents, Public Papers, Ronald Reagan, 1981, 139. For other examples, see ibid.,
178, 200, 468, 510, 557–58, 567; and U.S. Presidents, Public Papers, Ronald Reagan, 1982,
1:182. Martin Anderson has argued that no one in the administration actually said
that massive tax reductions would yield increased revenues, merely that the loss
would be offset to a substantial degree by increased growth. On this count, he is
quite simply wrong, as the above citations indicate. See Anderson, Revolution, 152–57.
117. Reagan quoted in Barrett, Gambling With History, 341; Martin Feldstein, “American
Economic Policy in the 1980s: A Personal View,” in American Economic Policy in the
1980s, ed. Feldstein, 59.
280 > Notes
Chapter 7
1. U.S. Presidents, Public Papers, William J. Clinton, 1996, 2:2021.
2. William C. Berman, America’s Right Turn: From Nixon to Clinton, 2nd ed. (Baltimore,
1998), 145–63; Herbert Parmet, George Bush: The Life of a Lone Star Yankee (New York,
1998), 429–36, 500–507; Bob Woodward, The Agenda: Inside the Clinton White House
(New York, 1995), 47–48; Arthur H. Miller, “Economic, Character, and Social Issues
in the 1992 Campaign,” American Behavioral Scientist 37 (November-December 1993):
315–28; Seymour Martin Lipset, “The Significance of the 1992 Election,” PS: Political
Science and Politics (March 1993): 7–16. Clinton quoted in President Clinton’s New Begin-
ning: The Complete Text . . . of the Historic Clinton-Gore Economic Conference, Little Rock,
Arkansas, December 14‒15, 1992 (New York, 1992), 3.
3. Bill Clinton and Al Gore, Putting People First: How We Can All Change America (New
York, 1992), 7.
4. Jordan Schwarz, The New Dealers: Power Politics in the Age of Roosevelt (New York,
1993); Alan Brinkley, “Liberals and Public Investment: Recovering a Lost Legacy,” The
American Prospect (Spring 1993): 81–86; Theodore Rosenof, Economics in the Long Run:
New Deal Theorists and Their Legacies, 1933–1993 (Chapel Hill, N.C., 1997), 60–65, 167–70.
5. Robert B. Reich, The Resurgent Liberal (and Other Unfashionable Prophecies) (New York,
1989), 57. On Reich’s conversion to public investment, see Conrad P. Waligorski, Lib-
eral Economics and Democracy: Keynes, Galbraith, Thurow, and Reich (Lawrence, Kans.,
1997), 144–45; and Louis Uchitelle, “An Old Liberal, a New Sermon,” New York Times,
12 April 1990.
Notes > 281
6. Robert B. Reich, Locked in the Cabinet (New York, 1997), 9. On the role of Reich’s
ideas in the Clinton campaign, see the account by Clinton’s pollster in Stanley B.
Greenberg, Middle Class Dreams: The Politics and Power of the New American Majority,
rev. and updated ed. (New Haven, Conn., 1996), 225–28.
7. President Clinton’s New Beginning, 8, 22, 25.
8. Paul E. Tsongas, Journey of Purpose: Reflections on the Presidency, Multiculturalism, and
Third Parties (New Haven, Conn., 1995).
9. Ross Perot, United We Stand: How We Can Take Back Our Country (New York, 1992), 8.
10. The following is based largely on Woodward, The Agenda. According to presidential
adviser George Stephanopoulos, Woodward had unusual access to the Clinton
White House in the preparation of his study. Woodward personally interviewed
many of the principals of his study, including Hillary Rodham Clinton and, secretly,
the president himself. The book displeased the White House, but Stephanopoulos
later characterized it as “a comprehensive and basically accurate account.” George
Stephanopoulos, All Too Human: A Political Education (Boston, 1999), 280–84 (quote
from 284).
11. On the bond market, see Louis Uchitelle, “Why America Won’t Boom,” New York
Times, June 12, 1994; and Amy Waldman, “Of Inhuman Bondage: The Bond Market
Has Policymakers in Its Grip,” Washington Monthly ( January-February 1997): 17–21.
12. Woodward, The Agenda, 136, 275, 160.
13. Ibid., 185.
14. U.S. Presidents, Public Papers, William J. Clinton, 1993, 1:1192; Reich, Locked in the Cab-
inet, 119.
15. Reich, Locked in the Cabinet, 119.
16. Ibid., 200.
17. Ibid., 337.
18. Quotes from Louis Uchitelle, “How Both Sides Joined the Supply Side,” New York
Times, 25 August 1996.
19. Reich, Locked in the Cabinet, 333.
20. Steven K. Beckner, Back from the Brink: The Greenspan Years (New York, 1996), ch. 1.
21. Quoted in Beckner, Back from the Brink, 307.
22. Quoted in “Clinton and Greenspan: The Odd Couple,” Business Week, 14 July 1997, 48.
23. U.S. Presidents, Public Papers, William J. Clinton, 1996, 1:315.
24. Michael Hirsh, “It’s Rubin, Stupid,” Newsweek, 30 June 1997, 36; “Shut Up and Smile,”
New Republic, 3 November 1998, 9; Louis Uchitelle, “The Dark Side of Optimism,”
New York Times, 8 March 1998.
25. Josef Joffe, “America the Inescapable,” New York Times Magazine, 8 June 1997, 41, 43.
26. Ibid., 41.
27. Louis Uchitelle, “Just a Little Inflation, and Everybody’s Happy,” New York Times, 8
September 1996; Abby Joseph Cohen, “It Was a Very Good Year,” Washington Post, 29
December 1996; “U.S. Jobless Rate Declines to 4.8%, Lowest Since 1973,” New York
Times, 7 June 1997; Richard W. Stevenson, “It’s the Economy, Congress,” New York
Times, 13 July 1997; “Budget Surplus Nears, And Plans for It Appear,” New York Times,
4 March 1998.
282 > Notes
28. Growth figures from U.S. Presidents, Economic Report of the President, 1998, Table B-4,
updated using figures from U.S. Department of Commerce, Bureau of Economic
Analysis, available from http://www.bea.doc.gov/bea/dn/niptbl_d.htm#whereto
(August 1998).
29. Kim Clark, “These Are the Good Old Days,” Fortune, 9 June 1997, 74. The characteri-
zation is repeated on the magazine’s cover.
30. Quoted in G. Pascal Zachary, “Global Growth Attains a New, Higher Level That
Could Be Lasting,” Wall Street Journal, 13 March 1997.
31. Quoted in John B. Judis, “The Second Rubin Administration,” New Republic, 10 Feb-
ruary 1997, 26.
32. Rubin and Clinton quoted in Richard W. Stevenson, “An Economy of Happily Ever
After?” New York Times, 24 November 1996; Greenspan’s testimony before the Com-
mittee on Banking, Housing, and Urban Affairs, U.S. Senate, 21 July 1998, at
http://wwwbog.frb.us/boarddocs/hh/ (last updated 22 July 1998).
33. Paul Krugman, “Stable Prices and Fast Growth: Just Say No,” The Economist, 31
August 1996, 19.
34. Louis Uchitelle, “U.S. Industry Group Assails Fiscal Policy,” New York Times, 24 Sep-
tember 1995; and Uchitelle, “Just a Little Inflation, and Everybody’s Happy,” New
York Times, 8 September 1996.
35. Quoted in Krugman, “Stable Prices and Fast Growth,” 19.
36. Quoted in David Rosenbaum, “It’s Reaganomics, Alive and Irresistible,” New York
Times, 11 February 1996.
37. Dole quoted in Louis Uchitelle, “It’s a Slow-Growth Economy, Stupid,” New York
Times, 17 March 1996. On the Dole-Kemp ticket, see Richard W. Stevenson, “Kemp’s
Ideas Move to Core of Party,” New York Times, 11 August 1996; Michael Wines, “A
True Believer Who Won the Day,” New York Times, 25 August 1996; and Elizabeth
Kolbert, “Dole in Taking Kemp, Buried Bitter Past Rooted in Doctrine,” New York
Times, 29 September 1996.
38. U.S. Congress, Joint Economic Committee, “The Growth Debate: How Fast Can
We Grow?” Joint Economic Committee web page (prepared August 1996), available
from http://www.senate.gov/~jec/grwthdeb.html.
39. Harken quoted in “How Healthy Is This Economy? Why Not Ask the Democrats?”
ibid.; Wellstone quoted in Beckner, Back from the Brink, 417; Frank Levy, The New Dol-
lars and Dreams: American Incomes and Economic Change (New York, 1998).
40. Robert Eisner, “Who’s Afraid of Jobs and Growth?” New York Times, 31 March 1996.
41. Robert Eisner, The Misunderstood Economy: What Counts and How to Count It (Boston,
1994), ch. 8. Quotation from 182.
42. President Clinton’s New Beginning, 284.
43. Lester C. Thurow, The Future of Capitalism: How Today’s Economic Forces Shape Tomor-
row’s World (New York, 1996), 185, 189.
44. Quoted in Louis Uchitelle, “Like Oil and Water: A Tale of Two Economists,” New
York Times, 16 February 1997.
45. New York Times, 17 February 1996.
46. Quoted in Beckner, Back from the Brink, 417.
Notes > 283
47. U.S. Presidents, Economic Report of the President, 1998, Table B-50.
48. Quotation from Paul Krugman, “Stay on Their Backs,” New York Times Magazine, 4
February 1996, 37. See also Krugman, “Stable Prices and Fast Growth,” 19–22;
Uchitelle, “It’s a Slow Growth Economy”; and Stephen V. Oliver and William L
Wachser, “Is a Productivity Revolution Under Way in the United States?” Challenge:
The Magazine of Economic Affairs (November–December 1995): 18–30.
49. Matthew Miller, “Grow Up,” New Republic, 13 May 1996, 22.
50. Jeffrey Madrick, The End of Affluence: The Causes and Consequences of America’s Eco-
nomic Dilemma (New York, 1995), 5.
51. Kevin Phillips, The Politics of Rich and Poor: Wealth and the American Electorate in the
Reagan Aftermath (New York, 1990); “Income Desparity Between Poorest and Richest
Rises,” New York Times, 20 June 1996; Matthew Miller, “Wage War,” New Republic, 30
September 1996, 16–20. For evidence that the trend toward greater inequality was
manifested elsewhere as well, see Frederick R. Strobel, “Britain Goes Down the Path
of Income Inequality,” Challenge: The Magazine of Economic Affairs (November–
December 1995): 35–39.
52. Lester Thurow, “Why Their World Might Crumble: How Much Inequality Can a
Democracy Take?” New York Times Magazine, 19 November 1995, 78–79; Reich
quoted in Keith Bradsher, “Productivity Is All but It Doesn’t Pay Well,” New York
Times, 25 June 1995.
53. Quoted in Matthew Miller, “Uh-Oh: The Social Security Mess—and How to Fix It,”
New Republic, 15 April 1996.
54. Edward N. Luttwak, The Endangered American Dream: How to Stop the United States
from Becoming a Third World Country and How to Win the Geo-Economic Struggle for
Industrial Supremacy (New York, 1993), 18.
55. Jacob Weisberg, “Leaner, Cleaner Liberals,” New Republic, 1 April 1996, 17, 25.
56. Derek Bok, The State of the Nation: Government and the Quest for a Better Society (Cam-
bridge, Mass., 1996), 33.
57. Quoted in Dean Foust, “Alan Greenspan’s Brave New World,” Business Week, 14 July
1997, 49.
58. “Fed Chief ’s Remarks Spur Surge in Bonds” and “Greenspan Upbeat, but Cautious,”
New York Times, 23 July 1997.
59. Quoted in Jacob Weisberg, “The Governor-President,” New York Times Magazine, 17
January 1999, 33.
60. The line is translated as “politics is a strong and slow boring of hard boards” in Max
Weber, Politics as a Vocation, trans. H. H. Gerth and C. Wright Mills (Philadelphia,
1965), 55.
Chapter 8
1. Richard M. Scammon and Ben J. Wattenberg, The Real Majority (New York, 1972);
Michael Barone, One Country: The Shaping of America from Roosevelt to Reagan
(New York, 1990). See also Ben J. Wattenberg, Values Matter Most: How Republicans
or Democrats or a Third Party Can Win and Renew the American Way of Life (New
York, 1995).
284 > Notes
2. Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambiva-
lence (Princeton, N.J., 1966), 272.
3. The Collected Writings of John Maynard Keynes, vol. 7, The General Theory of Employ-
ment Interest and Money (London, 1973), 383–84.
4. Joseph A. Schumpeter, History of Economic Analysis (New York, 1954), 41, 42.
5. Joseph A. Schumpeter, Capitalism, Socialism and Democracy, 3rd ed. (New York, 1950),
ch. 7.
6. Herbert Stein, “The Fiscal Revolution in America, Part II,” in Funding the Modern
American State, 1941–1995: The Rise and Fall of the Era of Easy Finance, ed. W. Elliot
Brownlee (New York, 1996), 285.
7. Dick Morris, Behind the Oval Office: Winning the Presidency in the Nineties (New York,
1997), 29.
8. U.S. Presidents, Public Papers, William J. Clinton, 1993, 1:1180.
9. “Excerpts From Remarks on Budget Deal,” New York Times, 30 July 1997.
10. John Lewis Gaddis, “Hanging Tough Paid Off,” Bulletin of the Atomic Scientists 45
( January–February 1989): 11–14.
11. See Stein, On the Other Hand: Essays on Economics, Economists, and Politics (Washing-
ton, D.C., 1995), 214; and Daniel Bell and Irving Kristol, eds., The Crisis in Economic
Theory (New York, 1981), xiii.
Index
Global economy, 130. See also and social roots of, 38‒39; and
Kansas City Doctrine economic theory, 25‒32; as
GNP clock, ix‒x growth liberalism, 51‒61, 239;
Goldwater, Barry, 104 Nixon’s Whiggish, 109‒31, 239;
Goodwin, Doris Kearns. See origins of, 18‒25; postwar
Kearns, Doris appeal of, 39; Reagan’s antista-
Goodwin, Richard, 50, 64 tist, 197‒213, 239
Gordon, Kermit, 52 Guide to Politics, 1954 (ADA), 44
Gordon, Robert, 127
Gowa, Joanne, 118 Habits of the Heart: Individualism
Gradualism, policy of (Nixon), and Commitment in American
112‒13 Life (Bellah), 135‒36
“Graduate, The,” 41 Haldeman, H. R., 111, 122, 123‒24,
Graham, Rev. Billy, 123‒24 147; and Nixon’s NEP, 118‒21
Graham, Otis, 173 Hamilton, Alexander, xi
Gramm-Rudman (1987), 203 Hansen, Alvin: and stagnationist
Gramm-Rudman-Hollings (1985), analysis, 6; and turn toward
203, 215 optimism, 14‒15, 17, 40, 215
Grant, Ulysses S., 13 Harkin, Tom, 225
Great Society, 74; and economic Harriman, Averell, 91
growth, 59‒61; and qualitative Harris, Louis, 163
liberalism, 64; shift from Harrod, R. F., 27
expansion to preservation of, Harvard-Tufts economists, 6‒7
93‒97; and Vietnam War, 66‒67 Hawkins, Augustus F., 167, 170‒71
Greenspan, Alan: as CEA chair- Hawley, Ellis, 236
man, 155; as Fed chairman, 217, Hayden, Tom, 150‒52
220‒21, 223, 225, 231; on Kemp- Hayes, Alfred, 77
Roth, 178 Hayes, Denis, 99
Griscom, Tom, 204 Hays, Samuel P., 65, 138
Gross, Bertram, 25 Hazlitt, Henry, 45
Growth liberalism, 68, 234, 239; Heller, Walter, 37; as JFK adviser,
defined, 61; Mills’s critique of, 51, 52, 54; on Kemp-Roth, 177;
75‒76 on Nixon’s policy, 126; as pol-
Growthmanship: Clinton’s post- icy entrepreneur, 237; on
ideological, 230‒32; conclu- stagflation, 154
sions regarding, 234‒40; Hoffman, Paul, 15
critiques of, 133‒45; cultural Hoover, Herbert, 4, 5, 30, 233
Index > 291